Increased job growth helped fuel a surge in tenant demand in the Greater Los Angeles office market in the third quarter with 705,097 square feet of positive net absorption, which pushed the vacancy rate down to 16.5% and the average asking lease rate up to $2.67 per square foot, a 6.5% year-over-year increase.
The momentum in many markets continued to swing toward a more landlord-favorable environment. But some submarkets, including the South Bay and downtown, reported very high vacancy rates: 21.3% and 19.7%, respectively.
West Los Angeles and Tri-Cities reported much healthier rates at 13.3% and 15.3%, largely due to the strong influence of entertainment, media and technology firms.
Development was at its highest level post-recession, with more than 2.3 million square feet of office space under construction, and projects are taking place in most major markets across the area.
Technology-and entertainment-based growth are expected to fuel the current expansion, with growth in both already accelerating. Companies such as Core Digital Media, Riot Games, IMAX, and Twitter are expanding their presence in Silicon Beach, which is home to more than 500 tech startups.
Office market fundamentals are therefore continuing to strengthen.
Industrial Market
Continued demand for industrial space in the market was noticeable during the quarter as activity levels reached a peak for the year. There were nearly 11.3 million square feet of total lease and user sale transactions. The recent rise in activity represents a 2.6% increase compared to the second quarter.
Available inventory continued to shrink.
The overall availability rate fell to 5.8%, dropping below the 6% range where it’s hovered for the past two years. The vacancy rate declined to 2.1% from 2.3% in the second quarter.
Currently, the Greater Los Angeles market has approximately 3 million square feet of industrial space under construction, the bulk of which is speculative, with about 25% build-to-suit space. Eight buildings totaling 1.2 million square feet were delivered to the market, and all but two were preleased.
Data & Analysis provided by CBRE Research
