Los Angeles County’s commercial real estate rebound was in full swing last quarter as the office vacancy rate declined, asking rental rates rose and construction increased. The activity underscores the belief that the nearly 194 million-square-foot office market has left the doldrums of the economic downturn behind.
The countywide vacancy rate dropped 1.2 points to 16.7 percent in the quarter ended June 30 compared with the year-ago period, according to data compiled by Jones Lang LaSalle Inc. The vacancy rate was about one-third of a point lower than the prior quarter. All but two of the county’s submarkets reported year-over-year vacancy rate declines.
The overall vacancy decline was fueled by tenants taking nearly 490,000 square feet of office space off the market, a dramatic turnaround from the year-ago quarter when the market gave back 236,876 square feet. The increase in demand allowed landlords to push Class A asking rates up to $3 a square foot, up 2 cents from the previous quarter and 19 cents from the year-ago period.
Jim Kruse, senior managing director at CBRE Group Inc., said companies’ interest in moving and expanding has picked up.
“The velocity of tenants that are touring space (for lease) has kicked up about 15 percent over two quarters ago,” he said. “Business leaders and executives are feeling good.”
The Westside was the hottest submarket – again. Vacancy there dropped 2.2 points year over year to 14.6 percent as companies absorbed nearly 250,000 square feet. Asking rental rates were, not surprisingly, up 18 cents over the year earlier to $4.02 as landlords felt emboldened by dwindling supply.
Video-game maker Riot Games did a deal for 77,000 square feet at the Westside Media Center at 12312 W. Olympic Blvd. with landlord Kilroy Realty Corp. while talent agency 3 Arts Entertainment renewed and expanded in Beverly Hills’ Golden Triangle with a 16,400-square-foot lease at 9460 Wilshire Blvd.
Beverly Hills held the county’s lowest vacancy rate, 8.8 percent, a seven-tenths of a point improvement over the previous quarter. Santa Monica was the second-tightest market with a vacancy rate of 9.4 percent, down a point from the year’s first quarter.
Neighboring South Bay started to fill up, too. Vacancy declined 1.1 points to 21.9 percent year over year.
Hollywood’s vacancy rate over the same period remained flat at 14.2 percent due to expanding office inventory, even as companies took 21,108 square feet off the market. Among them was Tax Credit Co., which signed a deal with Kilroy for 12,900 square feet at the 22-story office tower at 6255 W. Sunset Blvd.
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