Forecast sees higher rents for L.A. County offices
Rents in Los Angeles County office buildings will continue to rise during the next few years as businesses expand and take empty space off the market, according to a UCLA survey of real estate professionals to be released today.
The cost of leasing office space varies a great deal from neighborhood to neighborhood, but in 2006 the overall average price was up 4.7%. The annual rate of increase should be even higher in the years ahead, the forecast said.
“Our panel believes the demand will grow faster than the supply all the way through 2010,” said UCLA economist Jerry Nickelsburg, who conducted the survey through the university’s Anderson School of Management with law firm Allen Matkins Leck Gamble Mallory & Natsis.
The current boom in office construction will not be enough to cause a glut of space on the market, which augurs well for those who own buildings or are putting up new ones, the report said,
Overall vacancy was a little over 10% last quarter, according to real estate brokerage Cushman & Wakefield.
Professional service companies such as law and accounting firms, engineering businesses, technical design firms and healthcare are expected to expand the most, Nickelsburg predicted.
“Those are the big growth areas.”
On the Westside, “It seems like everybody is growing their business,” said broker Jeff Cowan of the Westwood office of real estate brokerage Studley, which represents tenants.
Many bullish business owners are renting more space than they need, he said, because they are afraid that if they wait until they add more workers, they won’t be able to find the office space they want or be able to afford it.
Other tenants are finding they have to leave buildings in locations they like such as Westwood and Brentwood.
“Some tenants are being forced out of West L.A. to around the airport and El Segundo because rental rates are going up dramatically everywhere,” Cowan said.
“Other tenants are paying the new freight cause they want to be here.”
Average rents in Westwood rose 29% between 2003 and 2006 to $3.77 per square foot per month, Cushman & Wakefield said.
Santa Monica rents were up more than 33% to $4.09.
The Los Angeles County market has not seen much office construction since the recession of the early 1990s.
As rents fell and vacancy grew during the 1990s, there was no incentive to put up new buildings.
There was a burst of development as rents grew during the dot-com boom around 2000, but expansion was quickly quashed by the 2001 recession.
The leasing and building trend is “definitely going up now,” Cowan said, though the real estate industry is reliably cyclical.
“Something will cause it to go the other way. We just don’t know when or why.”
