The Greater Los Angeles office market finished 2014 strong, posting the highest level of net absorption since 2005. Leasing activity levels during the first half of the year weren’t particularly robust but increased as the year closed.
West Los Angeles had the lion’s share of improvement.
Organic growth at technology, media and co-working firms was the primary driver of activity in the top submarkets.
Absorption
The region had 946,440 square feet of positive net absorption during the quarter.
Most submarkets continued strong trends from the beginning of the year.
Downtown Los Angeles showed positive gains in 2014. The submarket as a whole remained a blend of expansions and contractions. L.A. Care Health Plan expanded its footprint to accommodate new employees, and longtime downtown legal tenant Milbank signed a deal to move to Century City and reduce its footprint.
Office development in the region continued to progress in some of the strongest submarkets, such as Playa Vista and Hollywood. Yahoo preleased The Collective at Playa Vista project for 130,000 square feet, and Viacom Inc. preleased 180,000 square feet at Columbia Square.
Asking lease rates in the region were up 6% year-over-year, 0.7% over the previous quarter.
Industrial Market
The region’s industrial market had many positive signs as fundamentals improved throughout the year, primarily driven by healthy tenant activity.
The vacancy rate finished the year at 1.9%, down from 2.1% in the third quarter, and from 2.4% in the first quarter, the result of high demand and low product supply.
The San Gabriel Valley ended the quarter with the lowest vacancy, 1.5%, and Ventura posted the highest, 4.5%, after big move-outs.
Availability levels in the region followed a similar pattern as vacancies, falling since the first quarter due to constricted supply. Lack of product wasn’t due to lack of construction but to new completions preleasing or selling, leaving availability and activity unchanged in most submarkets.
The market generated 10.3 million square feet of gross activity during the quarter, bringing the year-to-date total to 41.2 million square feet.
The average asking lease rate ended the quarter at 64 cents per square foot, up 2 cents from the third quarter and 4 cents since the start of 2014. Rent increases in 2014 ranged from 5% to 10%. The majority of submarkets’ rates moved up as supply has dwindled.
Data and analysis provided by CBRE Research
