[The Westside has progressively become an incredible place for the co-location of tech, e-commerce and media firms. Silicon Beach, as it has come to be known, is real and many are starting to think it can surpass Silicon Valley as the world's center of tech innovation. In this article from Market Watch, author Shawn Langois discusses Silicon Beach's growing prominence with help from Industry Partners' own Trevor Belden.]
A hipster sips a flat white and leers at the techie at the next table. A 20-something with hairy legs and a flower in her hair grouses about rent. Lofts are being built where a family shop stood for generations and an old-timer laments the neighborhood that was.
Welcome to Silicon Beach. This isn’t San Francisco, but it’s sure starting to feel like it.
The divide between northern and southern California cuts deep, a rivalry that bangs on about sports teams, colleges, traffic, weather, jobs, women in bikinis, men in chaps. You name it, the two sides bicker about it. One particular battle front — the tech scene — has long been dominated by the Bay Area, but the Westside of Los Angeles County over the past few years has emerged as a contender.
“I’ve never seen anything like this in my 25 years,” said Trevor Belden, a commercial real-estate agent who played a role at brokerage Industry Partners in placing the likes of Uber and Snapchat in various locations across the Westside, which loosely comprises western neighborhoods of Los Angeles plus the cities of Santa Monica, West Hollywood and Venice. “There is absolutely no doubt in my mind that eventually Silicon Beach will be mentioned in the same breath as Silicon Valley as the world’s leading technology hub. It’s already happening.”
Of course, there’s still a long, long way to go. To get a sense of the dominance the neighbors to the north have on fostering startups, just check out these numbers: In 2014, the Los Angeles area struck 171 venture capital deals for a total of $2.05 billion, according to the National Venture Capital Association. That’s enough to put it in the top five for the first time ever.
The city of San Francisco, in the top spot, posted 876 deals for a record total of $17.74 billion — and that number doesn’t even include the San Jose area (#2), which would tack on another $6.88 billion.
It was a huge year all around, with megadeals like Uber and Tango securing Silicon Valley’s position as the unassailable leader in launching future tech leaders. But many are starting to believe that Los Angeles has what it takes to continue to draw some of the hefty tech players to its sunny coast.
Google GOOG, +0.59% one of the companies that makes up the heart and soul of Silicon Valley, is going all out to establish a big So Cal presence. The Venice office is already a staple in the explosive Westside scene, and now, with the purchase of 12 acres in nearby Playa Vista, Google is joining a herd of tech notables in expanding L.A.’s tech boundaries.
Google’s Los Angeles jobs page asks the question: “Who needs Silicon Valley when you can have Silicon Beach?” More and more seem to be asking the very same thing.
LinkedIn LNKD, -1.96% is rumored to be in the market for a huge space, according to real-estate-industry sources. A spokesman for LinkedIn, however, flatly denied the claim. Twitter TWTR, -2.03% which opened a Santa Monica office last year, is said to be looking to expand, as well. The company declined to comment.
Apple AAPL, -1.39% is also sniffing around, the sources said, though a spokesman gave only a “no comment.” Last year, Apple was reportedly looking at “several hundred thousand square feet” in downtown Los Angeles. Apple already has corporate space in L.A. with its Beats acquisition.
Tablet maker Fuhu, named Inc. magazine’s fastest-growing private company two years running, set up shop six years ago in El Segundo, a town best known for its Chevron refinery and a history as an aerospace hotbed. The runner up on the 2014 list, Quest Nutrition, is also based there. The rate of growth at these two companies — in Fuhu’s case, an incredible 158,957% sales surge over the previous three years to almost $200 million — is a reflection of the area’s transformation.
Fuhu co-founder and CEO Jim Mitchell, a South Bay, Calif. resident since the early 1990s, spent 19 years at consulting firm Accenture, where he worked with the likes of Google, Qualcomm QCOM, +0.55% Toshiba and Intel INTC, +1.03% But Mitchell, noting a dearth of opportunity in the area, had to commute up north for his business when he started.
“Before the dot-com bubble, there was nothing outside of Silicon Valley,” he said. “Now there are a lot of tech firms and startups in the South Bay. It works well for us since we cater to kids. Having premier entertainment companies like DisneyDIS, -0.56% and DreamWorks DWA, -1.30% here is a huge benefit.”
Indeed, the marriage of tech and media has proved a successful one in the age of everything social. To get a broader sense of the burgeoning scene, here’s this interactive crowdsourced map of more than 1,000 startups spanning the entire region, courtesy of Represent LA.
El Segundo and Playa Vista, home to Facebook FB, -2.87%YouTube, Microsoft MSFT, -1.28% and soon Yahoo YHOO,-2.61% and the aforementioned Google campus, are key to Silicon Beach’s next phase of growth. The area just south of Venice has it all. It is more affordable than Santa Monica and the Bay Area, has space to grow and is right next to the airport. Throw in its traffic-skirting proximity to some of the more attractive areas to live, like Manhattan Beach and Hermosa Beach, and it is not hard to foresee a continued boom.
“These sleepier coastal towns are seeing investment pour in from huge institutional players who previously focused solely on San Francisco and Manhattan,” Belden said. “They watched the growth, and they know the amount of seed capital that is funding these companies.”
The cost to rent commercial space has also risen at a breakneck pace. Santa Monica has been hot for years now, with the average asking price for space reaching its highest ever at $4.33 a square foot a month, according to Industry Partners data. Top-end rentals are fetching upward of $6.00 a square foot, having doubled from just four years ago.
Snapchat is one of the engines driving the change in Venice. The messaging app company’s latest move is to snap up 40,000 square feet of prime real estate, displacing dozens of other renters, according to the Los Angeles Times. Hence some of the inevitable bitterness
The upside of the heightened buzz and increased jobs brought by such an emergence is, no surprise, accompanied by the downside that the Bay Area knows all too well. Atop that list is the brutal cost of living. While companies shell out unthinkable sums for office space and enrich their employees, locals have had to deal with skyrocketing rents.
“Has it changed? Are you kidding me? It’s a completely different scene,” said Brad Agens, a digital advertising consultant and resident of two decades. “Venice went from a grubby place to live for those who couldn’t afford Santa Monica, to the hippest part of town. But in the past few years, all the tech and money is drastically altering the place, and I’m not sure for the better.”
He added that the small apartment he rented back in 1997 for $800 is probably going for more than $4,000 now. “Google really seemed to change everything when it moved in,” Agens added. He may not be sure if the area is better off now, but, as the landlord of a house in Venice, his financial situation has directly benefited from the transformation.
It isn’t just Venice, of course. Rents are on fire up and down L.A.’s coast. The median rental in Manhattan Beach, for instance, jumped 21% in June from a year earlier to $6,173 a month, according to the Zillow Rent Index. Venice, by comparison, shot up 17% over the same time frame to $4,857. San Francisco, meanwhile, has seen a 16% increase to $4,252.
Detractors may complain, or in some cases, even put up a fight, but they won’t halt “progress.” That’s true for both cross-state rivals.
Silicon Valley may never be caught, at least in perception. From Steve Jobs to Bill Hewlett and on to the latest crop of young guns, there is just too much history and lore there. The reality, however, is that L.A.’s tech scene is taking off faster than anyone could have imagined a decade ago, and it continues to close the gap, one Snapchat and one Fuhu at a time.
“This certainly has the potential to be the tech/entertainment hub. But a pure tech hub? I don’t think people down here necessarily even strive for that,” Fuhu’s Mitchell said.
The parting shot: “Here, it’s more about building great companies than cashing in and searching for the next big thing. It’s much more collaborative than it is in the Valley, where people jump from company to company. Their options vest, and they’re out.”
And the rivalry lives on.
[Industry Partners worked on the leasing of retail space at one of Downtown Santa Monica's most beautiful buildings—631 Wilshire Blvd. The building will soon be home to Sidecar Donuts, Mendocino Farms and Juice Served Here. See the excitement behind the openings in Eater LA's brief article below.]
Local developer Pacshore Partners renovated the old Art Deco building on the corner of 7th and Wilshire, transforming it into a lively, airy space that reflects its "everything local" theme. In rejecting corporate tenants, the developers have offered independent local eateries the opportunity to keep Santa Monica full of unique, appealing storefronts. As an extra attraction, local artist Bumblebeelovesyou recently completed a new and colorful mural on the side of the building.
Mendocino Farms will have an outdoor patio and is slated to open sometime in the fall. Sidecar Donuts is projected to open in August and while the aesthetics will be different than their Costa Mesa location, it will still have the same community feel as their flagship shop. Juice Served Here hopes to open in early September with custom furniture and a beautiful inset patio, which reflect their other location's décor. Here is a rendering shot of what their interior will look like.
Santa Monica will continue to thrive with these delicious new additions and will be a one-stop shop for breakfast, lunch, and dinner for both locals and visitors alike.