Much like the unrelenting sun that baked its concrete streets, Los Angeles County’s office market was hot last quarter.
Several large lease deals helped the county absorb nearly 312,000 square feet of office space and pushed the third-quarter vacancy rate down a point from a year earlier to 16.6 percent, according to data compiled by Jones Lang LaSalle Inc. It was the fifth consecutive quarter of vacancy improvement, and it left landlords feeling bullish. Class A asking rates increased 14 cents from a year earlier to $3.04 a square foot.
“The Los Angeles office market is in recovery and it seems to be accelerating,” said Michael Soto, research manager in the downtown L.A. office of Transwestern. “Vacancy still seems high, but there’s strong absorption and companies are in expansion mode.”
The county’s largest leases occurred in the Westside, which continues to be one of the region’s strongest submarkets. There, Verizon Communication Inc.’s Edgecast Networks took 135,000 square feet in the Reserve at Playa Vista, while Edmunds.com Inc. leased nearly 132,000 square feet at Santa Monica’s Colorado Center.
“Space just kept filling up, so you have spiking rents,” said Jacob Bobek, a principal at Avison Young Inc.
In all, the Westside’s rates jumped up 23 cents year over year to $4.08 a square foot as vacancy rate dropped 1.7 points to 14.8 percent. Beverly Hills boasted the county’s lowest vacancy rate again – an impressive 8.5 percent, 2.3 points down from a year ago period – and the county’s highest asking rate, $4.82 a square foot.
But the biggest surprise of the quarter might have been the strength of the San Fernando Valley, which actually posted the lowest vacancy rate of all the large submarkets – beating even the Westside. Its vacancy rate stood at 13.3 percent, down four-tenths from the prior period and 1.5 points from the year earlier. The market absorbed 170,433 square feet in the most recent quarter.
Trevor Belden at Industry Partners said he’s seen a number of the Valley’s local companies, from media to professional firms, move into expansion mode recently and that other companies, such as Clear Channel Communications, are now looking for tens of thousands of square feet of office space there.
Activity was also booming in Hollywood, which had the largest amount of construction of any submarket as an impressive 532,000 square feet of new office space is coming out of the ground. The submarket reported a vacancy rate of 13.8 percent, down from the prior period’s 14.2 percent, as it absorbed 7,665 square feet. The largest driver was NeueHouse, which signed a lease for 93,000 square feet at Kilroy Realty Corp.’s Columbia Square project, a 675,000-square-foot development under way at the former CBS Studios.
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