Real Estate Watch: Los Angeles County
L.A. Industrial Market Has Record Quarter
Office Market
For the first time in five quarters, the high-profile West Los Angeles region recovered from the one-two punch of the tech turmoil and economic slowdown to post positive net absorption in the third quarter.
West Los Angeles closed the quarter up 90,000 square feet, thanks in part to the signing of a 150,000-square-foot lease.
In fact, during the third quarter, the seven L.A. County sub-markets collectively had about 325,000 square feet of positive net absorption. Led by Tri-Cities/Glendale, there was positive net absorption in all of the regions.
The sublet vacancy rate declined slightly to 2.7% from 2.8% in the second quarter. The total vacancy rate, which includes direct and sublet space, decreased in the third quarter to 16.7% from 16.8% last quarter.
The average asking lease rate in L.A. declined to $2.18 per square foot from $2.19 last quarter. In Glendale/Tri-Cities, a 225,000-square-foot project broke ground during the quarter, bringing the county total to 2.2 million square feet under construction. That’s less than half the 4.5 million square feet under construction a year ago.
Industrial Market
It was the most active quarter on record for L.A.’s industrial market.
A two million-square-foot surge in the leasing and sales of buildings more than 100,000 square feet resulted in 13.5 million square feet of activity. Year-to-date activity of 35.4 million square feet rivals levels seen in the late-1990s.
There was more than 4.2 million square feet of net absorption during the quarter, up from 1 million square feet in the second quarter. That compares favorably to last year, when there was negative net absorption of 700,000 square feet.
The overall vacancy rate in L.A. fell 13% to 2.9% in the quarter. The vacancy rate has been on a downward trend each quarter in the past year,it has dropped 23% in the period. Availability rates have steadily decreased to 6.8% from last year’s fourth-quarter high of 7.5%.
The average asking lease rate for Los Angeles dropped to 48 cents, down slightly from 49 cents in the past three quarters and 51 cents last year.
There was 5.7 million square feet of space under construction in the third quarter, down from about 12 million square feet last year.
As long as the supply of new space remains restricted and activity continues, analysts expect positive net absorption to continue.
Data & Analysis provided by CB Richard Ellis’ Global Research & Consulting.
