Roku liked its existing campus environment at The Water Garden, but needed to create leverage knowing it had limited options to choose from with its goal of remaining in Santa Monica. Within 30 days of signing a 70,000 square foot lease to relocate in March 2020, the COVID-19 outbreak occurred, which posed great uncertainty for Roku, yet they still needed a space solution with its sublease ending 9 months later.
Anticipating that landlords were about to experience a prolonged period of slow leasing with the ensuing pandemic, Cresa advised Roku to terminate its relocation discussions in favor of reevaluating the company’s future space needs and capitalizing on likely tenant favorable market conditions. Cresa immediately helped Roku negotiate a one-year extension of its existing 22,000 sq ft space with The Water Garden knowing that they would not need 70,000 sq ft until the pandemic ended. Roku saved over $10 million of construction and relocation costs in 2020 alone and had an opportunity to assess its long-term needs on a more relaxed timeline. By November 2020, Roku’s market cap had increased by 4x, they continued their rapid hiring despite predominantly working remotely and they were ready to re-enter the market for a long-term solution. Cresa identified multiple new opportunities that had emerged in Santa Monica’s Media District and other submarkets due to increased sublease availability during the pandemic, allowing Cresa to drive the most competitive negotiation for Roku’s tenancy amongst landlords. Cresa ultimately structured a 72,000 sq ft relocation transaction in a more vibrant media campus than its current location with the following advantages:
• 7% effective rent savings from pre-pandemic negotiated deal
• Over $11 million in economic concessions from landlord to offset buildout costs
• Exterior building signage rights with increased branding
• Expansion and early termination rights to mitigate risk as Roku continues to scale