L.A.’s healthy economy boosts office market in the second quarter
Employment among Los Angeles-area companies continued to grow in the second quarter, prompting expansions that absorbed empty office space and pushed rents up a bit.
The lease activity marked an increase from the first quarter, when many business owners were taking a wait-and-see approach, according to property brokerage CBRE Group Inc.
“Nobody moved in the first quarter,” said Petra Durnin, CBRE’s director of research and analysis. “Post election, everybody was looking to see if we were going to go into a little recession and tapped the brakes a little bit. Now people see the sky isn’t falling and business is resuming.”
Lease agreements are not public documents, but real estate sources familiar with the market said one of the biggest deals last quarter was an 80,000-square-foot expansion by video game publisher Riot Games Inc., which occupies an expansive campus in West Los Angeles.
Overall, Los Angeles County office vacancy in the second quarter was 13.7%, down from 14.1% in the first quarter and 14% in the same period a year earlier, according to CBRE.
Average rents sought by landlords hit $3.19 per square foot per month, up from $3.13 in the first quarter and $3.02 a year earlier.
In the first years of recovery after the Great Recession, much of the growth in rent and occupancy occurred on the coastal Westside, Durnin said. Lately there has been a fresh focus on more inland neighborhoods such as Hollywood and Burbank.
Entertainment-related firms, including in the online media and technology sectors, are among the tenants going to Hollywood, said real estate broker Steve Algermissen of Cushman & Wakefield.
The introduction of upscale apartments and restaurants along with new and renovated office space in recent years has improved the area’s reputation with young-skewing firms, he said.
NBCUniversal Media, for example, leased offices on Hollywood Boulevard in the second quarter.
“Knowledge and value-creating businesses need to be in interesting places,” Algermissen said. “There is a desire to be novel and edgy, and Hollywood has become much cooler.”
Twitter: @rogervincent
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