Office Market
The Greater Los Angeles office market is seeing the unprecedented effects of the global, national and regional recessionary business cycle.
This market cycle is traditionally triggered by increasing vacancy rates, a lower number of deals, falling rents and an increase in concessions offered for new leases and extensions.
Employment news and state and local budgetary concerns have contributed significantly to the market slowdown. Los Angeles county unemployment rate has risen to 11.6% and the California unemployment rate to 11.5% for the second quarter.
The impact from the 2008 federal financial bailouts, stimulus packages and other federal programs are slowly beginning to trickle down to businesses and consumers, although there has not been significant activity in the investment or financial markets nor in consumer spending in the Los Angeles market.
On the statistical side, greater Los Angeles asking rental rates declined to $2.58 per square foot, per month. Vacancy rates in Los Angeles have increased to 13.9%, up 39% from the second quarter of 2008.
Absorption for the area ended the quarter at negative 1.4 million square feet. This was the eighth consecutive quarter of negative absorption. There were a few bright spots: downtown Los Angeles posted positive absorption at 38,060 square feet.
Increasing time on the market has many office owners offering concessions and broker incentives to market their office space and retain tenants.
Some 3.7 million square feet of sublease space,1.8% of the total space,has contributed to the overall vacancy, albeit lower than anticipated.
Industrial Market
The greater Los Angeles industrial market continues to demonstrate the impact of the recession.
Industrial availability is up 43% and activity is down 36% in the second quarter, compared to the second quarter of 2008. These Los Angeles industrial statistics mirror the national and global statistics as a direct result of the weakening manufacturing and international trade sector.
The greater Los Angeles industrial market has 34.1 million square feet of total vacant space and an overall total vacancy rate of 3.5%. This low vacancy rate still demonstrates the strength and viability of the Los Angeles industrial market when compared to other local and national industrial markets.
The availability rate is higher at 7.7%.
Continued negative employment news, manufacturing slowdowns on a regional and national basis, and state and local budgetary concerns have contributed significantly to the industrial market slowdown. Job losses in manufacturing, aerospace and the Los Angeles and Long Beach harbors have negatively impacted the industrial market.
Industrial asking rents ended the quarter at 64 cents per square foot, per month. This asking rent was an annual decrease of 6%. Absorption ended the quarter at negative 2.9 million square feet. This is the sixth consecutive quarter of negative absorption. Year-to-date absorption in the greater Los Angeles industrial market is negative 8.1 million square feet.
Industrial activity was up in the Vernon, San Fernando Valley and Ventura markets from the first quarter. Most of this activity was based upon renewals and lease extensions.
Data and analysis provided by CB Richard Ellis Group Inc.
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