Greater Los Angeles office market conditions continued to improve across all major metrics in the second quarter.
Vacancy rates ticked down as 733,343 square feet of office construction was completed. Net absorption increased substantially to roughly 1.4 million square feet, a 64.3% increase over the first quarter that was driven by continued strength in the West L.A. and South Bay submarkets.
The overall vacancy rate in Greater L.A. decreased from 15.8% to 15.6%, the lowest since the first quarter of 2009, and it represents six straight quarters of improvement. The vacancy rate in the Mid-Counties submarket decreased the most of any in the county, from 10.3% to 9.2%.
Overall vacancy in West L.A. fell from 12.7% to 12.3%. The region improved upon an impressive first quarter as net absorption came in at roughly 1.4 million square feet, up 64.3%.
Nine out of 10 submarkets showed positive net absorption; only the Hollywood/Wilshire Corridor had negative movement.
The overall region’s asking lease rate increased from $2.72 per square foot to $2.78 and is up 3.7% year to date. Select areas in the Hollywood/Wilshire Corridor submarket posted growth in rates. Rates in the West L.A. submarket continued to rise at a faster rate than the overall county.
Just under 2.3 million square feet of office space is under construction in Greater L.A. Hollywood remained the most active submarket, with 1.2 million square feet in the works, but space in other submarkets is starting to deliver.
Industrial Market
Activity in most industrial submarkets in Greater L.A. continued strong. Demand continued to be high as landlords sought multiple offers in a tightening market. Lease rates have, therefore, continued to increase in the region, with all classes seeing significant rent growth.
The overall vacancy rate in the region stands at 1.6%, down from 1.7% from the first quarter. Availability stands at 5%, down from 5.4%.
The market generated 11.6 million square feet of gross activity, bringing the year-to-date total to 22.8 million square feet. Gross activity was up 2.9%.
The overall market generated 1.2 million square feet of positive net absorption, bringing the year-to-date net absorption to 3.3 million square feet. Net absorption was down due to less availability.
The region’s average asking lease rate ended at 67 cents per square foot, up 1 cent. Rental rates and sale prices continued to climb. Rents have increased for class B space, as well as class A. All submarkets saw rental growth.
Data and analysis provided by CBRE Research
