By ELIZABETH HAYES
The commercial real estate market's upswing showed no signs of letting up in the second quarter, as vacancies inched further down in most markets, rents climbed, and development activity accelerated.
Office tenants in Los Angeles County moved into 695,000 more square feet of space than they vacated in the second quarter, bringing the overall vacancy rate to 15.5 percent. That's down from 16 percent in the first quarter.
The Westside and Tri-Cities remain the most sought-after local markets.
"We couldn't be busier. Normally, we would expect a seasonal slowdown," said Tim Macker, president of Westmac Commercial Brokerage Co. "We're seeing strong momentum. On the Westside, it's so tight both for (property) available to lease and to purchase."
Westside office tenants moved into 44,717 more square feet of space than they vacated during the second quarter, yet the office vacancy rate inched up to 13.3 percent from 12.3 percent in the first quarter. That slight increase was due to new buildings coming onto the market, however, not market weakness. Excluding Hollywood, Miracle Mile and Park Mile, the Westside vacancy rate was only 11.4 percent.
Cushman & Wakefield reported that the Tri-Cities is even tighter than the overall Westside, at 13 percent, down from 13.9 percent in the first quarter.
Those markets, understandably, are also the most expensive. The Westside's average monthly asking rent is $2.05 a square foot, and Tri-Cities' rent is $1.93 a foot. That compares with a countywide average of $1.69.
Rents reached upwards of $3 for some top-tier space in Santa Monica, a preferred location for many entertainment firms.
"It's got a good location and good quality of life," said Bob Safai, owner of brokerage firm Madison Partners.
While sticker shock is rare, those seeking space are often in for a rude awakening at the lack of choices, Macker said. Contiguous blocks of class-A space greater than 50,000 square feet have dwindled throughout the Westside.
"They automatically think if they come to Santa Monica, there would be space waiting for them, but a number of buildings are 98 to 100 percent leased," he said.
The only Westside weak spots are fringe buildings along Westwood Boulevard, where vacancies are higher, he said. Indeed, Westwood was the weakest performing Westside submarket in the second quarter, with tenants vacating 67,896 more square feet than they occupied.
While the Westside and Tri-Cities hummed in the second quarter, other areas lagged. Most notably, downtown, the LAX area, Mid-Wilshire and Long Beach all remain soft. Mid-Wilshire's vacancy rate improved slightly, to 27.6 percent in the second quarter from 28 percent during the previous three months, but its average monthly lease rate of $1.15 is the lowest in the entire county, even lower than LAX-area rents.
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