Tenants leased up more office space in Los Angeles County last quarter than they had since before the recession.
More than 1 million square feet came off the market, amounting to the highest net absorption number the county has seen since the fourth quarter of 2005, according to data collected by Jones Lang LaSalle Inc. The countywide vacancy rate declined six-tenths of a point to 16.1 percent in the second quarter compared with the previous period and 1.1 points versus the year-ago period.
The tightening allowed landlords to push up Class A asking rates by a cent to $3.13 a square foot.
“The market was pretty vibrant and is continuing to be strong,” said Jonathan Larsen, principal and managing director at Avison Young. “It’s a good tenant market and a good landlord market. It’s a happy medium right now.”
The county’s office market is becoming less segmented by industry. The tech and creative firms that were once concentrated on the Westside are beginning to spread out to downtown Los Angeles, Hollywood and the San Fernando Valley. The willingness to locate away from Venice and Santa Monica is giving companies more flexibility in both the type of offices they occupy and the rates that can pay.
“If you take a 50,000-foot overview of the market when you evaluate what’s going on, healthy job growth was a big part of it,” said Mike Arnold, executive vice president and managing director at Newmark Grubb Knight Frank’s Century City office.
The county’s dipping unemployment rate was 7.1 percent in April, down from 7.8 percent in the same month a year ago. Growing job numbers typically mean companies begin to expand their office space as well.
Among the largest deals last quarter, DaVita HealthCare Partners Inc. took 185,000 square feet in a 10-year deal at the Apollo at Rosecrans creative space project in El Segundo. The deal contributed to the half-point decline in the vacancy rate of the South Bay to 21.7 percent and positive absorption of 131,565 square feet.
In Burbank, Walt Disney Co. renewed its lease for 111,000 square feet at 2411 W. Olive Ave. The 11-year deal lent some strength to the market where many feared the entertainment giant might consolidate those employees on its studio campus.
Josh Wrobel, managing director at JLL’s downtown office, said the absorption is likely to continue. There are a number of large companies in the market for space that may sign deals by the end of the year.
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