Tishman Speyer kills 10-story office project in DTLA’s Arts District

Tishman Speyer has shredded longtime plans to build a 10-story office building in L.A.’s Arts District, given the topsy-turvy market for downtown offices.

The New York-based developer led by Rob Speyer has quietly let its application lapse to build the 222,200-square-foot building at 2159 East Bay Street, in Downtown, Urbanize Los Angeles reported.

The Department of City Planning terminated entitlement proceedings late last month for Tishman Speyer’s proposed project next to the Los Angeles River.

The developer had filed plans in 2017 to demolish four warehouses that served as the headquarters of Hyperloop One, Elon Musk’s transportation company, to build the three-building office complex.

The 1.7-acre site would have contained 217,200 square feet of offices with floor-to-ceiling windows and 5,000 square feet of ground-floor shops and restaurants.

Seven years ago, the climate for office development in Downtown was strong, with the Arts District a magnet for tech and media firms such as Spotify, Honey and Warner Music Group. The district transformed from derelict warehouses to a hub for “creative offices.”

Warner Music Group set up a West Coast headquarters in a former Ford factory at 7th Street and Santa Fe Avenue. Then Spotify inked leases for 155,000 square feet of offices inside At Mateo.

There was also a wave of proposed offices from Onni Group, Jade Enterprises and Skanska. Likewise, Hines sought approvals to build ground-up projects next to the Warner Music Group offices along Santa Fe Avenue.

In April, Pasadena-based Legendary Development won approval to build an 18-story 316,100-square-foot office tower at 411 South Hewitt Street, in the Arts District.

Since a broad shift to remote work during the pandemic, the office market in greater Downtown has cooled. High vacancies and higher borrowing costs have caused building values to plummet, leading to mortgage defaults and epic office tower foreclosures.

In central Downtown, office vacancy was 26 percent in December, according to Cushman & Wakefield. Offices in non-central Downtown were 33 percent vacant.

While Tishman Speyer may bow out in the Arts District, the developer is still active in the greater Los Angeles market, according to Urbanize. The firm has four mixed-use apartment buildings under construction in Downtown Santa Monica.

Tishman Speyer has also acquired a vacant development site in Baldwin hills that was once slated to serve as a headquarters campus for Coffee Bean.

— Dana Bartholomew