can DTLA office space be a veblen good?
Jul 7 , 2020

I won’t lie, I found out about this economic principle on the Netflix show “Explained,” the diamond episode. Since then I’ve been thinking: can DTLA office space be a veblen good? A veblen good is type of product that increases in demand when the price increases. For instance, the quality of attorney services is often fallaciously thought that the higher the hourly the rate, the better the attorney and his or her services. The same goes with diamonds. Some people might say “Oh that diamond is priced so high… it must be of an exquisite quality” or, “I can’t get buy my wife that diamond it’s too cheap, she’ll find out, then I’ll never hear the end of it!” But can this phenomena occur in the search for office space? Well, the answer is yes and no.

Suppose you’re looking at a list of DTLA office spaces and one is ranked $2.60 per square foot and the other rate is $1.50 per square foot. What’s the first thing that comes to your mind? Is it, “Wow the latter is a great deal!” or, “The latter must be very bad quality!” Well, I don’t know what your answer is, but I could see someone thinking the office space must be of an awful quality.

A logical person would visit each office building. She would personally assess the quality of the view, the flooring, the natural light, the ceilings, the lighting, the common areas, the amenities, and et cetera. Then that person would determine for herself whether the space for $1.50 per square foot is simply awful and the rate is indeed justified, or it is simply just a great deal. My concern is that people will assume the latter with my listings that are priced aggressively: not realize it’s a great deal and think it must be awful.

You might say, “Donegan are you worrying that your clients looking for office space in DTLA are stupid?” My answer to that is, “Not really.” I think if people aren’t studying the spaces closely, and doing a preliminary search, they might just toss that one out of the pile just because it’s so far below the other buildings nearby it’s not even worth touring.

Actually, I normally assume my clients are smart. I assume they’ll shop around. So if I see the market going one way or another, I’ll price them in anticipation for that; and expect people to see it’s a good deal. But what about those decision makers who aren’t meticulous searchers? Ones that make decisions quickly and move forward full throttle. Well, often times, business owners make decisions like this. It’s one of the DISC personality types, the D for dominant. And business owners are the ones who rent office spaces.

So what is the solution? Well, there is no perfect way to market something, I suppose. I’ll continue to assume my renters are smart and see that my listings are priced well. But I’ll also keep in mind the possibility that some people looking for DTLA office space may be quick to judge just by the price per square foot being low. Check out our current Los Angeles office space listings DTLA and give us a call/text to check them out, if you’re serious about leasing that is!



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