Office
During 2000, the Los Angeles office market outperformed the previous year and achieved record levels in the process. Despite 800,000 square feet of new construction that entered the market, vacancy held firm at 10.46% in the fourth quarter, just above the 10-year low of 10.42% achieved two quarters before. Led by South Bay, Glendale/Tri-City, and San Gabriel Valley with double-digit declines in vacancy over the past year, the county-wide vacancy rate fell 7% from 11.3% in 1999.
After appreciating 9 cents in the fourth quarter, yet another all-time high average asking lease rate of $2.03 was attained for the second consecutive quarter. Over the past year, lease rate appreciation was achieved in all LA submarkets and in all classes. West Los Angeles, Mid-Wilshire Corridor and Downtown Los Angeles accounted for the majority of the appreciation, each exceeding 20%.
Net absorption for the fourth quarter was 1 million square feet, pushing the total for the year to 6.2 million square feet, 47% above the 1999 total of 4.3 million square feet. Pre-leased space in completed projects accounted for 77% of the positive net absorption in the fourth quarter.
Industrial
Building on the momentum from 1999, the Los Angeles industrial market in 2000 outperformed last year in many areas. Demand remained strong in the fourth quarter, outstripping supply with 1.4 million square feet of sale and lease activity. Despite 0.9 million square feet in new starts in construction and 1.7 million square feet of completed projects, the vacancy for 2000 was pushed down to approximately 2.9% by the end of the fourth quarter.
Gross activity for the fourth quarter seasonally declined to 10.1 million square feet, nearly matching the fourth quarter of 1999. Total activity for 2000 increased over the 1999 total by 1.4 million square feet. South Bay and San Gabriel Valley accounted for 39% of the total activity for the year. By no strange coincidence, these same markets experienced tremendous construction activity, posting more than 50% of the Los Angeles County total. Fourth quarter construction activity increased to 11.1 million square feet, the highest level in eight quarters. The year-end lease rate appreciated 4% to 52 cents from 50 cents in the fourth quarter 1999. High lease rates have energized construction activity to meet the voracious demand for industrial space in Los Angeles County.
