Office rents spike as tech and media tenants continue leasing spree: report

Quarterly leasing reached a three-year high of 5.3 million square feet
By Natalie Hoberman | July 08, 2019 02:00PM

Downtown Los Angeles (Credit: iStock)

Downtown Los Angeles (Credit: iStock)

Content creators like Netflix and Apple continued to absorb much of the available office space in the second quarter, proving the battle for office space is quickly becoming as contentious as the battle for the best content.

Leasing activity reached a three-year high of 5.3 million square feet in the second quarter, according to a recent office report from commercial brokerage Savills. Much of that activity was driven by the so-called FAANG companies: Facebook, Amazon, Apple, Netflix and Google.

That helped push rents up roughly 9 percent year over year to an average of $3.68 per square foot in the second quarter. Availability across Greater L.A. tightened 10 basis points to 18.7 percent.

Netflix led the largest push among FAANG, adding another 163,770 square feet across two buildings in Hollywood. Apple also added 96,330 square feet at 10000 West Washington Boulevard Culver City.

Despite a number of big leases, Downtown Los Angeles continued to post some of the region’s highest vacancy rates. Vacancy there circles at 24 percent, inching slightly behind South Bay’s vacancy rate of 25.3 percent. L.A. Health Care Plan, Ghost Group, TubeScience are among some of the tenants that recently leased in the submarket.

Inventory was tightest in Santa Monica and Century City, where vacancies for Class A space were at 10.1 and 8.5 percent, respectively. The Westside cities also demanded rents of at least $5.3 per square foot, the most expensive Class A rents in the region.

On the opposite end of the spectrum was the San Gabriel Valley. Low rents of $2.35 per square foot have been lowering the vacancy rate there, now at 15.2 percent.