The L.A. leasing market is becoming a drag.
Available office space in Los Angeles and four other of the country’s largest office markets increased by a combined 789,000 square feet in the three-month period ending in June, dragging down the national market and reflecting an overall slowdown in leasing, according to a new report from data firm Reis.
By comparison, absorption in those markets stood at 3.63 million square feet during the first quarter of the year.
U.S. leasing has been lackluster through the economic recovery with slow job gains and companies seeking less space per employee than in previous years, according to the Wall Street Journal. But analysts said uncertainty coming out of Washington, D.C. is now playing a role in the tepid leasing numbers as well.
“Many had hoped that there would be more clarity from Washington by now on what fiscal stimulus they would be promoting,” Barbara Byrne Denham, REIS’s senior economist, wrote in an email to the Journal. “The lack of a plan for either tax reform or infrastructure investment has discouraged many from over-leasing or over-expanding.”
The national vacancy rate has been slow to decline during this economic expansion. It stood flat during the second quarter of the year at 16 percent, down from a height of 17.6 percent during the height of the recession. Between 2003 and 2007, the vacancy rate fell from 17 percent to 12.5 percent.
One bright spot for landlords is that new supply nationwide has been limited. Supply grew by just7.5 million square feet in the second quarter, compared to 10.1 million square feet the same time last year.
Absorption was also slow in New York, Chicago, Houston and Dallas last quarter, according to Reis. [WSJ] – Rich Bockmann