Office vacancy rates in Los Angeles County tightened slightly in the second quarter, with rental rates reaching record peaks.
The second-quarter vacancy rate was 15 percent, down from 15.1 percent in the first quarter and 16.1 percent a year ago, according to data from Jones Lang LaSalle. Combined with an influx of new office construction and redevelopments, the low vacancy rate helped contribute to a substantial increase in asking rents, which averaged $3.42 a square foot in Class A buildings, up from $3.29 in the first quarter and $3.13 a year ago.
“On the macro level, the second quarter continued to see a lot of velocity in the office market, specifically with the technology and entertainment sectors really driving the activity right now,” said Michael Arnold, executive vice president at Newmark Grubb Knight Frank in West Los Angeles.
There are 2.1 million square feet of office space under construction in the county, down from last quarter’s 2.3 million square feet. More than 220,000 square feet of inventory was taken off the market in the period, nearly half the 432,000 square feet take out of circulation the previous quarter.
Strength was seen in the South Bay, where the vacancy rate fell to 18.4 percent from 19.6 percent last quarter and 21.7 percent a year ago. Asking rents throughout the submarket rose to $2.53 a square foot from $2.44 in the previous period.
Boston-based Intercontinental Real Estate announced in May that it acquired El Segundo office campus Apollo at Rosecrans, a 550,000-square-foot space that’s reportedly fully occupied. Mike McKeever, a senior vice president at JLL’s downtown L.A. office, said the complex’s sale price, estimated at more than $300 million, nearly doubled average historical sale prices in the South Bay city.
“As long as employment stays on track and the market stays out of a recession, you’ll see El Segundo fill up and the trickling effect lead south – just like what happened on the Westside,” McKeever said.
The Westside still reigns as the county’s most in-demand office market, with per-square asking rents hitting $4.76 in the second quarter compared with $4.62 last quarter and $4.20 a year ago.
The media and entertainment industry accounted for 54 percent of all Westside leasing activity this quarter, McKeever said.
“It’s an industry that generally drives the growth for most of Los Angeles – especially in the Westside, the South Bay, and Hollywood,” he said.
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