The Los Angeles County office market held steady in the fourth quarter, showing incremental gains in occupancy levels without any dramatic leaps. Steady improvement, even at a glacial pace, is becoming the postrecession norm.
“We’re starting to get some lift, but it’s not like the arrow is pointed straight up,” said Jim Kruse, senior managing director at commercial real estate services firm CBRE Group Inc. in Century City. “It’s like we’ve gotten off the runway but we haven’t raised the landing gear yet.”
Part of the drag in late 2012 was hesitancy about the global economy, the presidential election and the year-end “fiscal cliff,” said Connie Hwang, regional research director at Avison Young Inc. Another lingering factor is the overhang of empty space that traditional banking, finance and legal firms have been sitting on since the recession.
Taking up the slack have been entertainment, media and technology firms, which have been seeking the shared workspace and open floor plans of creative office buildings, mostly on the Westside and in the Burbank media district, Kruse said.
Landlords who attract those users are doing much better in boosting occupancy than those with traditional spaces that typically appeal to business service firms in sectors such as real estate and insurance. Those companies have not fully replenished their staffs since the recession and many are still not using from 10 to 15 percent of their space.
“The downturn allowed the market to recalibrate and forced companies to reconsider what amount of employees” they needed, Hwang said.
Overall, the county office market absorbed 118,530 square feet in the fourth quarter and took 1.2 million square feet off the market in 2012, according to data from Jones Lang LaSalle Inc. That’s down from 1.8 million square feet in 2011, when the market was first registering the recovery.
The county closed the year with an overall vacancy rate of 17.5 percent, the same level as in the prior quarter and three-tenths of a point lower than the year-ago period. Class A asking rents in the fourth quarter of 2012 rose four cents to $2.91 from $2.87 the previous quarter. Asking rents were up 14 cents from a year ago, when they were at $2.77.
The Westside office market gave back 2,687 square feet during the quarter but asking rents increased four cents to $3.77 in what is already the priciest office market in the county. The vacancy rate in the submarket stayed flat at 17 percent.
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