The Greater Los Angeles office market had pockets of positive activity in the second quarter, but overall progress was slim.
Local markets continued to ebb and flow with the economy, and the Greater Los Angeles region benefited from increased economic activity and organic job growth.
Asking rents increased, and concession packages held constant, but there was a large disparity between market leaders and laggards.
The Greater L.A. region posted a modest 152,409 square feet of positive net absorption on the whole in a trade-off between class A and class B space.
Class B
Class B, following a trend that began last year, continued to drive market momentum for the region. It posted gains in net absorption of 443,338 square feet, while class A properties posted negative net absorption of 290,979 square feet.
Class A
Class A space took hits in major business centers from Tri-Cities to El Segundo. Partially responsible for the regional performance were anticipated moves by large tenants, but the contraction was amplified by meager gains in the Greater San Fernando Valley.
Class A space in West Los Angeles demanded $3.90 compared to $3.84 in the previous quarter. Landlords in other submarkets seemed to slightly relax. Overall asking rates in the Tri-Cities dipped to $2.65 from $2.68, and from $2.06 to $2.04 in the Hollywood/Wilshire Corridor.
The construction pipeline for the region continued to swell. Hollywood and Playa Vista were neck-and-neck in the race for the top spot of square feet under development.
New low-rise campuses were the talk of Playa Vista. Tishman Realty & Construction’s campus project received a lot of interest since the developer unveiled renderings at the beginning of the quarter. Lincoln Property Co., a longtime player in the area, has been slow to release details about its new development across from the under-construction IMAX campus. The site is rumored to be 750,000 square feet of office space.
Hollywood was not to be outdone, with several projects breaking ground.
Industrial Market
The Greater Los Angeles industrial market experienced reduced activity levels at the start of 2014. The decline can be attributed to a lack of available inventory. The availability level ticked up in the first quarter, but it remains low and creates limited options for prospective tenants.
Quality available space that is brought to the market is quickly absorbed. The availability rate increased to 6.3% from 6.2%, while the vacancy rate increased to 2.4% from 2.3%.
The overall availability rate has hovered in the 6% range for the past two years, as well
as the vacancy level, which has been below 3% for the past 18 months. These levels are expected to dip further over the next 12 months.
The Greater L.A. market has approximately 2.8 million square feet of industrial space under construction. The bulk of the construction is speculative, with about 25% of the total being build-to-suits.
Data and analysis provided by CBRE Research
