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Saturday, May 28, 2022

L.A.-Area Market Gains Momentum

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The Los Angeles-area office market has been gaining momentum for the past year.

Current growth is fairly slow and measured, but there have been enough gains in key industries to fuel positive growth in 2012.

Tenant demand has been fairly modest, but some market areas such as West Los Angeles and Tri-Cities are experiencing stronger activity anchored by media and technology companies.

The amount of total vacant space has been on the decline, as direct vacant space and sublease vacant space are considerably lower than the levels from last year.

The overall vacancy rate was 16.9% at the end of the third quarter. That is down compared to 17.4% in the second quarter and 18.1% a year earlier.

The average asking lease rate, which has been leveling out for more than a year, began to have consistent quarter-over-quarter growth in the third quarter.

The average asking lease rate increased to $2.45 per square foot, a quarterly increase of about 1.2%, while the latest 12-month growth rate was also positive at 2.8%.

Office projects under construction total about 474,000 square feet in Greater Los Angeles, lower than last year’s figure of 574,000 square feet and considerably lower than the fourth quarter of 2008, when construction projects totaled roughly 2.9 million square feet.

The bulk of new construction is occurring in West L.A. with roughly 415,000 square feet of activity. That accounted for about 88% of the area’s total activity.

Industrial Market

The L.A.-area industrial market has performed relatively well since the market downturn and economic recession a couple years ago.

The vacancy and availability rates have fallen from their respective recessionary peaks.

Asking lease rates have leveled off, and industrial demand continued to gain momentum into the third quarter, especially for class A industrial buildings over 100,000 square feet.

Gross activity during the first three quarters of the year totaled about 11 million square feet per quarter in Los Angeles County.

The vacancy rate in the county was 2.8% at the end of the third quarter, while the availability rate was 6.5%.

Current projects under construction in the Greater Los Angeles area totaled roughly 2.9 million square feet in the third quarter, 56% higher than last quarter and 94% higher than the same time last year. But the activity level is significantly lower than the construction boom in the 1990s, when levels ran up to 4 million square feet.

About 47% of the new construction is occurring in the South Bay, while projects in Ventura, Vernon and Mid-Counties accounted for the rest.

Analysis provided by CBRE Group Inc.


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