LA office market I-sales are down but leasing remains steady: report
Investors are buying up lower-priced properties with potential for conversion, though big deals are being done
Los Angeles office investment sales totals was down nearly 25 percent, which market pros attributed in part to investors buying up lower-priced properties like older office stock ripe for creative conversions.
As part of Savills Studley’s third quarter office report, it tallied office investment sales over the first seven months of 2018. Sales from that January to July period totaled $3.8 billion, or 23.3 percent below the same period last year. Despite the decline, there have been major trades. Boston Properties paid $628 million for the Santa Monica Business Park and StarPoint Properties closed on its $193 million purchase of the Wells Fargo Center in Downtown, among others.
From July to September, leasing was largely steady, totaling 3.3 million square feet, according to the report.
Like other major markets, L.A. has seen larger firms brine to dominate more of the local leasing market. The biggest lease of the year so far was CoreSite’s extension for 176,700 square feet, at GI Partners’ One Wilshire tower. The extension added 17,200 square feet to its existing space. CoreSite is looking to build its own 180,000-square-foot data center north of DTLA as well.
At the same time, Savills Studley found that companies are downsizing into more “efficient space” and “densifying” with new leases. Availability for Class A office space fell slightly to 17.9 percent in the third quarter compared to the same period last year, but availability rates for older Class B and Class C spaces ticked up to 23.8 percent.
Asking rents continued to rise from July through September. The citywide average was $39.27 per square foot, up from $36.58 last year. Hollywood remains the most expensive market, with asking rates at $57.54, more than twice the amount in the cheapest market, the San Gabriel Valley.