The overall office market in Los Angeles County showed continued strength during the first quarter of 2018 despite a quarter-over-quarter decline in the asking price of Class A office rent.
Countywide net absorption – the net change in occupied space over a period of time – turned positive at nearly 112,700 square feet as the vacancy rate fell to 14.2 percent from 15 percent during the fourth quarter of 2017. The net absorption rate rose despite nearly 2.2 million square feet of office space under construction in the county, with nearly half of it on the Westside – Culver City in particular (see L.A. Rising, page 25).
Total office inventory throughout L.A. County rose 0.7 percent, or 1.3 million square feet, to nearly 193 million square feet in the first quarter compared with the previous quarter.
Net absorption turned positive in downtown Los Angeles, the San Gabriel and Santa Clarita valleys and the Westside in the January-through-March period. Class A rents rose five cents on average countywide compared with a year earlier to $3.67 per square foot.
The emergence of Hollywood as a top office destination gave it the county’s most eye-popping numbers. The submarket’s vacancy rate tumbled to 9.4 percent, down more than five percentage points from the previous quarter. Meanwhile, Class A rents soared to $5.57 per square foot.
Jones Lang LaSalle Inc., which provided the first-quarter office market statistics, has begun to count inventory under construction in its rent calculations. The pending new space comes on the higher end and has pushed Hollywood’s average asking Class A rent up, according to David Eberling, a JLL spokesman.
Hollywood’s net absorption nearly tripled to 157,000-plus square feet, while there was nearly 426,000 square feet of office space under construction. The neighborhood has attracted companies such as Netflix Inc. and WeWork.
“This is an era of flag-planting tenants,” said Josh Wrobel, managing director at JLL. “Netflix has planted its flag in Hollywood.”
Other noteworthy flag planters during the first quarter include Apple Inc., which agreed to lease 128,000 square feet of space at Lincoln Property Co.’s 8777 Washington Blvd. in Culver City. Amazon.com Inc.’s entertainment wing, Amazon Studios, signed a 75,000-square-foot lease for office space at Hackman Capital Partners’ Culver Steps development, also in Culver City.
The changes in consumer shopping habits provided one of the biggest stories for the county’s commercial real estate in the first quarter.
For reprint and licensing requests for this article, CLICK HERE.
Stories You May Also Be Interested In
- WESTSIDE: Vacancies Continue to Climb as Tenants Renew for Reduced Space
- WESTSIDE: Landlords Turn to Concessions to Attract Tenants
- Vacancy Rate Remains Steady After Strong Year of Absorption
- Special Report: Real Estate Quarterly
- SAN GABRIEL VALLEY: International Trade Fuels Positive Absorption
- Santa Monica Paces Market, L.A. County With Top Asking Rents
- Quarterly Real Estate
- Vacancies Dip Marketwide but Disney’s Exodus Looms in Burbank