The Los Angeles skyline may soon see a new chapter for its iconic Aon Center, as the 62-story tower has been sold for $148 million in a deal marking both potential promise and lingering challenges for downtown office spaces.
A bargain compared to the past, private investors led by Carolwood LP acquired the Aon Center, a 1970s-era behemoth boasting over 1.1 million square feet of space, for roughly $133 per square foot. Newmark Group, Inc., a leading commercial real estate adviser and service provider arranged the sale.
While a significant discount compared to the $268.5 million paid by the previous owner in 2014, the purchase reflects the ongoing struggles of downtown L.A. office properties. The district grapples with a 19.2% vacancy rate and declining rents, a consequence of both pre-pandemic trends and the pandemic’s remote work acceleration.
A Potential Turning Point?
Despite the market hurdles, some see the Aon Center deal as a potential sign of revival for downtown office investment. Sean Fulp, a broker at Colliers who represented the buyer, expressed optimism in an interview with CoStar stating, “The ownership group’s acquisition of the iconic Aon Center exemplifies the flow of private capital into Los Angeles, seizing the opportunity created by market dislocation.”
Fulp believes the relatively lower price could entice new tenants and ultimately contribute to a downtown office rebound. However, Ryan Patap, a senior director at CoStar Market Analytics, advises caution, emphasizing the significant risks involved for potential buyers in the current market climate.
Beyond Aon Center: The Broader Downtown L.A. Picture
The Aon Center sale is just one piece of a larger puzzle. While it represents the largest downtown L.A. office deal of 2023 and the second-largest in the entire L.A. region, it’s crucial to remember that the broader market picture remains complex. The sale stands out as the only tower property exceeding 1 million square feet to be sold in the region since 2020.
A Mixed Bag of Signals
The Aon Center deal sends mixed signals about the future of downtown L.A. office spaces. On the one hand, it suggests that, at least for some investors, bargains exist and potential opportunities are worth exploring. On the other hand, the significant discount compared to pre-pandemic prices and the persisting vacancy and rent issues paint a picture of a market still very much in flux.
Only time will tell whether the Aon Center sale will truly mark a turning point for downtown L.A. offices. However, it undoubtedly injects a dose of intrigue and possibility into the ongoing narrative of this dynamic commercial real estate landscape.