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Friday, Feb 3, 2023

Report Puts Office Market Lease Rates on Plateau

The office market in Los Angeles County and other major California markets have peaked for the current business cycle, according to the Summer/Fall 2018 Allen Matkins/UCLA Anderson Forecast California Commercial Real Estate Survey.

That doesn’t mean a crash is right around the corner, according to the survey, which indicated office lease rates will remain around current levels for the next several years.

The biannual survey – conducted by the law firm of Allen Matkins Leck Gamble Mallory & Natsis and UCLA Anderson School of Management – polled a panel of California real estate professionals. The survey projects ahead three years for the office, industrial, retail and multifamily sectors of California’s commercial real estate market.

Two-thirds of the panelists surveyed said they will not develop office projects in the coming year. The apparent peak and plateau owes to several factors, respondents said, including labor and material costs that are exceeding inflation.

The tariffs that President Donald Trump imposed on steel aren’t helping matters, Tipton added.

“It’s a little bit of a salt in the wound from a cost perspective,” he said.

Office lease rates, meanwhile, aren’t strong enough to offset those conditions.

“When you look at that rental rate growth, it’s not justifying new construction,” said John Tipton, a partner at Allen Matkins’s Century City office.

The average asking rent for Class A office space in Los Angeles County during the second quarter of 2018 rose 3.6 percent year over year to $3.75 per square foot, according to data provided by Jones Lang LaSalle Inc.

Meanwhile, the industrial real estate market is expected to remain hot, multifamily demand remains strong, and retail continues to be the weakest sector in commercial real estate, according to the survey.

SVA in Hermosa

Hermosa Beach City School District has hired SVA Architects of Santa Ana for its ambitious school-building program.

The school district plans a new school on the site of the eight-decade-old North School in the South Bay city, as well as a renovation of Hermosa View School and Hermosa Valley School, both considered by some observers to be overcrowded.

Hermosa Beach voters two years ago approved Measure S, a $59 million bond measure to fund school construction.

The status of North School, which closed as an elementary school and has been rented out to private preschools since the 1980s, has been the subject of controversy.

Hermosa Beach Taxpayers Association sued the school district last year, alleging it refused to seriously consider less-costly alternatives to demolishing the school. The lawsuit alleged that it would cost $18 million to renovate the school instead of $36 million for its demolition.

A Los Angeles County Superior Court judge sided with the school district in March.

The Hermosa Beach City Council voted two months later to delay North School’s environmental impact report by five months in order to study traffic around the proposed new school.

Colliers Vet Returns

Colliers International has reunited with Michael Weiner, who has rejoined the brokerage as a senior vice president in its downtown office.

Weiner came back to the firm from real estate advisory company Bridgman Real Estate in Sherman Oaks, where he served as company president for seven years. Prior to that, Weiner was senior vice president at Daum Commercial Real Estate Services from 2006 to 2011.

Weiner has specialized in office leasing and investment transactions coupled with consulting and advisory services for major companies – both foreign and domestic.

He represented Northrop Grumman Corp. on its 225,000-square-foot world headquarters lease in Century City before its relocation to Falls Church Va., in 2011.

Weiner also represented Golden State Mutual Life Insurance Co. in the sale and leaseback of a 55,000-square-foot headquarters.

Weiner is a graduate of UC San Diego and USC Marshall School of Business.

Staff reporter Ciaran McEvoy can be reached at cmcevoy@labusinessjournal.com or (323) 556-8337.


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