CHART NOTES:
The LA office market is defined as single- and multi-tenant buildings and parks of 30,000 square feet or larger, but excluding government, medical and R & D; buildings. Rental rates are full-service gross. The industrial market is defined as single-tenant M & W; and R & D; buildings 10,000 square feet or larger. Gross available includes space under construction. Net absorption figures are actually “net activity,” i.e. the change in the total amount of available square feet from one period to the next. Rental rates are triple net. Both property types: Availability is for direct lease space only and does not include sublease space. Absorbed square feet do not include pre-leased space. Lease rates are per square foot per month, excluding free rent, tenant improvements and other concessions, if any, and weighted by vacant square feet. Historical figures have been adjusted to reflect changes to the base; consequently historical figures reported here may not agree with previously reported figures.
Industrial Market
As the last quarter of the century came to a close, the industrial base in Los Angeles County expanded by another 5 million square feet, pushing the base to more than 850 million square feet, second in the nation only to Chicago in total square footage.
Demand for industrial space remained strong through the final reporting period of 1999. The market’s appetite continued to outstrip supply as a net 4.7 million square feet of absorption occurred during the fourth quarter.
Over the past five years, the availability rate has dropped by one-third, from 8.3% in 1995 to 5.17%. At the end of 1998 the availability rate was 5.35%. Pressured by a substantial 37% upswing in new construction, the vacancy rate crept up a tenth of a percentage point from the third quarter, to 3.0%.
With a quarterly increase of 2 cents, the average asking lease rate for industrial property closed at the historically high rate of 50 cents per square foot. Despite the increasing scarcity of available land or cost-effective tear-down sites, new construction increased to 9 million square feet from 6.5 million square feet in the third quarter of 1999.
Office Market
At the end of 1999, the LA County office market had expanded to approximately 161 million square feet. Sustaining the momentum built up over past quarters, the office market closed the decade on a high note.
The 1.8 million square feet of net absorption during the fourth quarter pushed the annual figure to the highest level achieved in the past decade, 4.5 million square feet. Over the past five years, Los Angeles experienced nearly 14 million square feet of net absorption. Together, the sub-markets of West Los Angeles and South Bay accounted for almost 60% of this absorption. Glendale/Tri-cities and the San Fernando Valley contributed another 25% to the total.
With all markets outside the CBD achieving decreases in vacancy, the year-end vacancy rate declined to the lowest level of the decade, 11.48%. Two sub-markets, West Los Angeles and Glendale, were well into single digits at 5.5% and 7.8%, respectively.
Average asking lease rates increased to the highest year-end rate since 1992, $1.79 per square foot, a 3% increase over the last year. Construction activity of new office space increased by another 2% to 2.9 million square feet, the highest level of the year.
