Leasing activity remained generally lackluster across Los Angeles County in the third quarter as the countywide vacancy rate saw the slightest of dips and net absorption inched toward positive.
The county posted an office vacancy rate of 17.4 percent for the quarter, two-tenths of a point better than the prior period and one-tenth of a point better than the 17.5 percent posted in the year-earlier period. About a quarter-million square feet of inventory was taken off the 190 million-square-foot office market as the average per-square-foot asking rent moved upward 6 cents, to $2.98, over second-quarter levels, according to data gathered by Jones Lang LaSalle Inc.
The industrial market told another story, as the region’s position as an import-export hub kept that market essentially fully leased. Countywide, the industrial market boasted a 5.2 percent vacancy rate and an average asking rent of 54 cents a foot. The tightest market was central Los Angeles, which had a gaudy 3.4 percent vacancy rate on a market base of more than 190 million square feet. Asking rents in that submarket topped the region, coming in at 62 cents a foot, 6 cents higher than the year-ago period.
With the leasing market hewing to the status quo, the tale of the third quarter was investment activity, which was notable both for its volume and for prices that some of L.A.’s properties were able to attract.
“Almost counterintuitive to the office demand fundamentals is that investment sales activity in L.A. has been feverish,” said Arty Maharajh, vice president of research at Cassidy Turley Inc. “A number of large sales over $1 billion, typically reserved for a market like New York City, have either transpired … or will transpire in the near future.”
The quarter was bookended by the sale of MPG Office Trust, which announced in the second quarter that it had agreed to be purchased by Brookfield Office Properties Inc. for a deal valued at $430 million. That deal closed in early October and made Brookfield the largest holder of office space in downtown Los Angeles.
The biggest sales news of the quarter came in the form of an $858 million deal for the 2.8 million-square-foot City National Plaza, bought by CommonWealth Partners in a deal with Sacramento-based CalStrs and longtime investment partner Thomas Properties Group Inc.
On a per-square-foot basis, the priciest deal of the quarter was Lionstone Group’s sale of the four-building Lantana Media Campus in Santa Monica to Jamestown 28 for $328.4 million, or $677 a square foot.
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