Tech and media companies were boon for LA office market in Q4: CBRE

Netflix and Amazon Studios leased nearly 2M sf at the end of 2018

Jan.January 18, 2019 10:15 AM
Netflix CEO Reed Hastings and a rendering of the City of Angels (Credit: Netflix and Kilroy)

The Los Angeles office market ended 2018 on a strong note, driven by big deals from tech and media companies in Hollywood and the Westside.

“Major content creators” including Netflix and Amazon Studios leased upwards of 1.7 million square feet in the fourth quarter, according to CBRE’s Greater L.A. Q4 report. Netflix signed the largest deal, starting with a 328,000-square-foot lease at Hudson Pacific Properties’ project in Hollywood in October. A month later it inked a 355,000-square-foot lease at Kilroy Realty’s Academy on Vine. The streaming service giant renewed another 418,000 square feet in the fourth quarter as well.

Development was also strong in the fourth quarter. There was 3.4 million square feet of office space under construction, the most since the beginning of 2008.

Overall, vacancy in L.A. County essentially remained the same, going from 14.2 percent in the third quarter to 14.1 percent in the fourth, according to CBRE. West L.A. recorded a vacancy rate of 11.4 percent while Century City’s vacancy rate was 7.1 percent, showing its recent surge in popularity.

CBRE predicted that demand in the West L.A. and Hollywood markets would drive tenants to Burbank, El Segundo, or the Arts District, in search of Class A and creative office space.

Tenants are also scooping up space at new construction buildings, with pre-leasing commitments at 37 percent, according to the report.

CBRE expects office vacancy to steadily drop through 2019 because net absorption this year matched average gains over the last five years.

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