Remote work hits LA office space, Aon Center sale shows

Commercial real estate in Los Angeles has taken a hit amid remote work and high interest rates. Visions of America/Joseph Sohm/Universal Images Group via Getty Images

Aon Center, the third-tallest tower in Los Angeles, has sold for $147.8 million — about 45% less than its last purchase price in 2014 — as office values continue to suffer from high vacancies and financing costs.

The sale is the largest office deal this year in downtown Los Angeles, which has been among the hardest-hit US office markets since the pandemic as remote work becomes more popular and escalating interest rates drive down values, wiping out owners’ equity.

“With a new low basis and a well-capitalized owner, Aon Center will be competitively positioned to attract and retain tenants who desire a well-amenitized skyline tower in the heart of downtown Los Angeles,” Sean Fulp, a Colliers broker representing the buyers, said in a statement.

The buyers are a group comprising of Carolwood LP, a Los Angeles-based investment firm, Daniel Abrams and Adam Tischer, who was also a broker with Fulp in the sale. The seller, San Francisco-based Shorenstein, was represented by Kevin Shannon of Newmark Group Inc.

Almost 30% of downtown LA office space was available for lease or sublease in the third quarter, brokerage Savills reported. Many tenants and investors are turned off by the neighborhood’s tough commutes and high homeless population. Rents downtown were 40% lower than in more-desirable areas, such as Century City, where the availability rate was 16%, according to Savills.

An affiliate of Brookfield Corp., downtown’s one-time largest landlord, defaulted on three office towers in the area this year. An added blow for sellers was a voter-approved 5.5% transfer tax on real estate transactions greater than $10 million that took effect April 1.

Office prices nationwide have fallen 35% from a peak in the first quarter of 2022, when the Federal Reserve began raising interest rates to combat inflation, according to real estate analytics firm Green Street.

The 62-story Aon Center, at 707 Wilshire Blvd., was built in 1973 and purchased in 2014 by Shorenstein for about $268.5 million, according to property records.

The sale price works out to about $134 a square foot. The most recent large downtown LA office property to sell was the Union Bank building. That deal closed in March for $104 million, or about $150 a square foot.