The Greater Los Angeles office market continued to strengthen throughout the start of the year.
Change varied by submarket but was undeniably a theme as landlords, tenants and investors interacted in the office market.
Positive Absorption
Landlord confidence grew, and tenants began to diversify their search for space between submarkets, resulting in positive net absorption of 555,669 square feet, up from 23,821 square feet in the fourth quarter.
The gain in occupancy came primarily through a 533,664-square-foot contribution from the class B sector and a 22,005-square-foot uptick in class A occupancy.
Real estate fundamentals continued to move positively.
Overall asking lease rates increased modestly to $2.57 per square foot from $2.54.
Asking lease rates for class A space were $2.84 per square foot for the quarter, up from $2.78. Asking lease rates for class B space improved to $2.09 per square foot from $2.06.
Year-over-year rent growth, at 4% for all asset classes, echoed market optimism.
More than 100,000 square feet of construction was added to an already aggressive pipeline that totaled 1.4 million square feet. Nearly 40,000 square feet of new space was delivered to the San Gabriel Valley.
The development scene in downtown Los Angeles and Hollywood is nothing short of bullish. Numerous Hollywood projects continued to progress, while JH Snyder and Argent proposed new projects. IMAX continued to build out its campus at Millennium and Campus Center, and Tishman Speyer unveiled plans for a campus in bustling Playa Vista. There were new proposals for residential developments in Downtown L.A.
Industrial Market
The region’s industrial market had reduced activity levels, which can be attributed to a lack of available inventory.
The availability level ticked up but remains low and presents limited options for prospective tenants.
The availability rate increased from 6.2% to 6.3%, while the vacancy rate increased from 2.3% to 2.4%. The overall availability rate and vacancy level are expected to dip further over the next 12 months with expected steady demand, despite new construction deliveries.
There were about 8.5 million square feet of total lease and user sale transactions in the first quarter.
Gross activity levels were down about 7.6%, while available inventory increased by less than 1%.
The market has about 2.8 million square feet of industrial space under construction.
Five new buildings totaling 271,221 square feet were completed and delivered to the market during the quarter. An additional 2.9 million square feet of speculative product is expected to break ground over the next 12 to 18 months.
Data and analysis provided by CBRE Research
