Commercial real estate in the Greater Los Angeles area mounted a recovery in 2011 that continued into the first quarter.
Its office market showed early signs of recovery last year despite soft market fundamentals.
The market marked a modest demand for office space for the first time since 2007.
By the end of the first quarter, the office vacancy rate dipped to 17.7% from the previous quarter’s rate of 17.8%, and average asking lease rates seemed to be leveling out.
Fundamentals
Office market fundamentals should improve in 2012. Recent employment data have been more positive, and the lack of new supply will bolster leasing.
U.S. international trade exports played a key role in the regional economic recovery over the past two years. The local ports saw a modest decrease in total container traffic between 2010 and 2011, but they also marked a slight increase in total loaded containers last year, and the forecast for 2012 calls for an increase in total trade volumes.
Meantime, the Los Angeles area’s industrial market marked a strong 2011 and should strengthen further during the next 12 months.
Industrial gains were driven in part by positive tenant demand and low levels of construction last year.
First-quarter gross activity totaled about 11.1 million square feet in Greater Los Angeles, up by approximately 2 million from the fourth quarter. Net absorption also increased, to more than 1.7 million square feet.
Vacancy Rate
The vacancy rate in the Greater Los Angeles market dropped during the first quarter from 3.1% to 3%.
A lack of class A industrial space should spur an increased volume of speculative construction in 2012.
Electronic commerce is also supporting industrial fundamentals, as electronic retailers raise warehouse space requirements.
Data analysis provided by CBRE Group Inc.
The Real Estate Watch Chart
Net Absorption, Rates, etc. is provided in a Adobe Reader .pdf print-friendly file.
