More than 6 million square feet of office space currently sits empty in downtown Los Angeles. Many perceive the area to be an unappealing place to visit much less locate a business. Despite such perceptions, the area has seen a slight improvement in office vacancies over the last year, dipping to about 19 percent. The Business Journal Forum asks:
Do you think the commercial vacancy rate in downtown L.A. will continue to decline?
Director of Lease Consulting
Deloitte & Touche LLP
“I think for this year the vacancy rate will decline, but not at a great pace. I think it will be a mild reduction. A lot of experts are saying that the market will firm up, but I think downtown will not be a high-speed train. With the bank mergers, I think it will be tough to fill all the space.”
“My sense of it is that it’s not likely to increase, but I don’t think it will decrease dramatically. It will likely stay where it is or decline a little, but will not get dramatically better. By and large, the people there will not leave a lot of law firms, accounting firms will probably stay. But you won’t see the entertainment industry or other large users of office space moving into downtown L.A.”
Edwin Van Ginkle
Senior Manager, Real Estate Consulting
Arthur Andersen LLP
“Yes, for certain landlords. If the landlord has a quality product, their vacancy rates will decline. But with others whose product is not as well-positioned in the marketplace because of the building’s age or the public’s perception of the building, their vacancy rate will go up. The right product will sell, the wrong one won’t. Also, in downtown, the job creation is not good. Jobs in law firms, accounting firms those located downtown are not being created at the same level as in other industries.”
Central City Association
“Yes, we believe vacancy rates will continue to decline in the downtown area. We think, based on the work we’re doing, that this market will continue to get better visibility and the perceptions out there will continue to change. We’ll see a more positive understanding of the importance of downtown and that it is an important place to put your business.”
Asia Pacific Capital Co.
“I think so. Real estate is a supply-and-demand industry. Demand keeps on going up, and there has been no major construction since the late ’80s. The supply is limited, the demand is still there. Some of the other areas, such as Burbank and West L.A., have been improving over the last few years, and they are not cheap anymore. People will begin to recognize that downtown rents are very attractive.”