The commercial real estate market lurched into hyperdrive in the first quarter, with tenants devouring office and industrial space throughout Los Angeles County and rents exceeding their past peak on the Westside.
"The market's really entered into near hysterical proportions. Many brokers around town remind me of taxicab drivers in a hurry," said Carl Muhlstein, vice president at Cushman Realty Corp. "Space is disappearing and entitled land is becoming even a rarer commodity."
With the level of new construction far short of demand by fast-growing dot-coms, telecom firms and even a few "Old Economy" companies, office tenants in L.A. County moved into 1.5 million more square feet of space than they vacated during the quarter, according to Grubb & Ellis Co. That's about 300,000 more square feet than L.A. County tenants absorbed in the first quarter last year.
Industrial tenants were even hungrier, leasing or buying 10.6 million square feet in the quarter from the San Gabriel Valley to Ventura County. Developers are frantically trying to keep pace, with 10.3 million square feet of industrial space currently under construction.
It's little surprise then that rents continued inching up while vacancies maintained their downward slide. Overall, the average monthly office asking rent climbed to $2.23 per square foot countywide, up from $2.18 in the fourth quarter of 1999. The countywide office vacancy rate slid to 12.5 percent in the first quarter, down from 16.7 percent in the fourth.
But those numbers belie exactly how hot the market is in certain areas, chiefly the Westside, where monthly asking rents are flirting with $4 a foot for top-tier buildings.
Meanwhile, the office markets in downtown L.A., Mid-Wilshire, Century Boulevard and the San Gabriel Valley still have a lot of catching up to do, although each area tightened in the quarter.
Pockets of activity
Out of 27 submarkets tracked by Grubb & Ellis, only five had negative net absorption for the first quarter (meaning more space was vacated than moved into). In three of those submarkets the West San Fernando, Conejo and Santa Clarita valleys the amount was extremely small and attributed to movement around the market, said Regina Burke, client services manager at Grubb & Ellis.
Westwood and Central Torrance had more-sizable negative net absorption, but only because tenants have signed leases but not yet actually moved into 1100 Glendon Ave. in Westwood and the former Epson headquarters in Torrance, Burke said.
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