Office Market
The Los Angeles County office market saw another strong quarter.
The overall county vacancy rate decreased to 9.2% in the third quarter, down 0.3% from the second quarter. Activity among class A office space continues to drive down vacancy, particularly the Hollywood/Wilshire Corridor with the vacancy falling to 9% in the third quarter compared to 10.2% in the second.
The San Gabriel Valley market continues to hold the lowest overall vacancy rate at 4.6% last quarter, a slight decline from 4.8% in the prior quarter.
Overall net absorption in L.A. County was 784,832 square feet in the third quarter, a decrease from the prior quarter’s 1.3 million square feet of absorption. Despite significant activity, lease activity in the Hollywood/Wilshire Corridor has started to slow. Activity in the area was driven by renewals in the third quarter as tenants start to see a tightening in the market.
Construction activity in L.A. County surged this quarter with almost 2 million square feet under construction. Projects have been added to the San Fernando office market, most notably in Woodland Hills with 255,192 square feet. West L.A. added another 309,481 square feet for a total of 1.09 million square feet under construction. Ventura County plans to add 343,230 square feet, up from 257,895 square feet under construction last quarter.
Industrial Market
The L.A. County industrial market saw yet another strong quarter with a decline in vacancy and availability. The third quarter closed with positive net absorption and an overall increase in gross activity. The decrease in vacancy and availability rates compounded with an increase in lease rates shows that demand for industrial space remains high.
In the quarter versus a year earlier:
Vacancy decreased from 1.8% to 1.3%.
Availability decreased from 5% to 4.5%.
Average asking rental rates increased from 57 cents per square foot to 63 cents per square foot.
Vacancy in the county decreased to 1.3% in the third quarter compared to 1.4% the prior quarter and 1.8% a year earlier.
All Los Angeles area submarkets remain tight with vacancy rates ranging from a low 0.3% (in Los Angeles and Vernon) to a high of 1.9%. The Mid-Counties market has the highest vacancy rate, though it declined from 2.2% in the second quarter to 1.9% this quarter.
Average asking lease rates have responded to the dropping in availability by increasing to 63 cents per square foot in the third quarter from 61 cents per square foot in the second quarter.
Gross activity increased from 10.2 million square feet in the second quarter to 10.8 million square feet in the third, a quarterly increase of 5.9%.
Completed construction fell to 5.9 million square feet from 6.1 million square feet in the second quarter. Activity seems to be staying lower than the previous recorded 8.8 million square feet in the third quarter of 2005. The markets with the highest construction activity are the West San Fernando Valley, San Gabriel Valley and South Bay.
Data & Analysis provided by CB Richard Ellis Group Inc.’s Research Department.
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