Greater LA office market “still in growth mode”: report

Los Angeles /
Apr.April 19, 2017 04:30 PM

UPDATED, 10:10 a.m., April 20: Despite negative absorption in the first quarter, the office market in the Greater Los Angeles area is slated for continued growth in 2017, according to a new report from CBRE.

Thanks to strong demand, and strong job growth, CBRE predicts rents will rise 8.2 percent in 2017 and vacancies will fall 0.3 percent.

The office market saw a “double whammy” of factors that contributed to a negative absorption in the first three months of 2017 — two major move-outs and 742,053 square feet of new supply — but rent continued to grow from $2.94 per square foot per month in the final quarter of 2016 to $3.04 in Q1 2017, according to CBRE’s analysis.

“There’s a lot of talk about slow down, but when you look at our data, there’s no indication of that,” said Petra Durnin, head of research and analysis for CBRE Southern California. “We have room for vacancy to come down and for rent to [further] appreciate.”

Rents have gone up across submarkets, with West L.A. growing nearly 5 percent year-over-year to $4.74 per square foot a month and DTLA up 6 percent to $3.39 a square foot. CBRE predicts rents will rise 8.2 percent in 2017 and vacancies will fall 0.3 percent. But as landlords pushed rents up, they’ve also increased concessions significantly, the report said.

Meanwhile, overall vacancy increased slightly during the first quarter of 2017 to 14.3 percent, but that number still reflects a dip since this time last year. The negative absorption can be attributed Sony moving to a building it purchased and IPG downsizing in West L.A., CBRE said.

Demand is anticipated to remain high, according to Durnin, despite diminishing land for new construction. There are 1.8 million square feet of office space currently under construction, according to the report — the lowest since the first quarter of 2014.

“As space tightens, it’ll be more difficult for tenants to find choices for available space,” Durnin said.

But thanks to strong job growth, it’ll still be sunny days ahead, she added.

Greater L.A. added more jobs in 2016 than San Francisco and San Jose combined, the report said. CBRE predicts that office-using employment will grow another 1.4 percent in L.A. County over the next four quarters.

 

A previous version of this story said there was a negative absorption of 742,053 square feet, when in fact, the square footage applies to the new supply that hit the market. 


Related Articles

arrow_forward_ios
Joel Schreiber and 801 South Broadway (Google Maps)
WeWork investor enters Chapter 11 on DTLA “metaverse hub”
WeWork investor enters Chapter 11 on DTLA “metaverse hub”
Redcar Properties' Jim Jacobsen and 843 North Spring Street (LinkedIn, Lever Architecture)
Offices built with cross-laminated timber coming to Chinatown
Offices built with cross-laminated timber coming to Chinatown
Initiative to decide whether LA hotels should house the homeless
Voters to decide whether LA hotels should house the homeless
Voters to decide whether LA hotels should house the homeless
Long Beach (Illustration by The Real Deal with Getty)
Downtown Long Beach office vacancy highest in 20 years
Downtown Long Beach office vacancy highest in 20 years
Jamison Properties' Jaime Lee with the Pierce National Life Building (LinkedIn, Google maps)
Koreatown office building poised for residential conversion
Koreatown office building poised for residential conversion
The Home Depot's Ted Decker with 16830 Devonshire St
Home Depot plans to build 136K sf store in Granada Hills
Home Depot plans to build 136K sf store in Granada Hills
SteelWave's Barry DiRaimondo with 1382 Bell Avenue (LinkedIn, JLL)
SteelWave sells Tustin office building for $91M
SteelWave sells Tustin office building for $91M
Restaurant owner Tony Roman and Basilico’s Pasta E Vino, 21501 Brookhurst Street in Huntington Beach (Basilico’s Pasta E Vino/Facebook, Google Maps, Getty)
Anti-mask restaurateur in OC sues landlord
Anti-mask restaurateur in OC sues landlord
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...