The Los Angeles County office market continued to heat up for its third consecutive quarter, helping reinvigorate construction and redevelopment across the area to levels last seen five years ago.
The countywide office vacancy rate dropped two-tenths of a point to 17 percent in the quarter ended March 31 compared with the previous quarter, according to data compiled by Jones Lang LaSalle Inc. Tenants took 701,386 square feet of office space off the market, about 36,000 square feet less than the previous quarter but a marked improvement from the 626,083 square feet the county gave back in the year-ago period.
“Certain parts of the city are more bright than others, but the market is dynamic and getting stronger,” said Jonathan Larsen, regional managing principal at Cassidy Turley Inc., who oversees deals across the county. Still, he added, “the stronger areas are really carrying the weaker areas.”
The Westside, as usual, led the recovery. With vacancies at 9.5 percent, Beverly Hills became the only submarket in the single-digit range. Santa Monica, close on its heels, boasted a rate of 10.4 percent. The two cities reported the county’s lowest vacancy rates.
The Westside, chock-full of tech and creative companies that make up the fastest-growing local submarket, is particularly hot. Among the more buzzworthy of the first quarter’s deals was San Francisco microblogging site Twitter Inc. signing a deal for 17,000 square feet to open its first permanent L.A. office at 150 Pico Blvd. in Santa Monica.
As these more popular neighborhoods lease up and rental rates start to climb, nearby markets are starting to benefit.
“The market is awfully tight at the moment,” said Andrew Jennison, a partner at Santa Monica brokerage Industry Partners. “There are not a lot of large blocks of space available, so consequently companies are looking east and south for alternatives.”
Indeed, the South Bay continued to be a low-cost beachside alternative for creative firms, and its vacancy rate dropped down a half-point to 21.4 percent. E-commerce company Just Fab Inc., which inked the largest deal in the submarket last quarter, almost doubled its size with another lease for 95,000 square feet at 800 Apollo St. in El Segundo. By leasing in that city, the company was able to secure a large amount of space and take advantage of the average monthly rental rates that are $2 less a square foot than in pricier Santa Monica.
The San Fernando Valley also showed signs of improvement as vacancy rates dropped seven-tenths of a point to 14.1 percent overall. The Central Valley, which includes Sherman Oaks, saw its vacancy rate drop to 11 percent, the third-lowest rate in the county.
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