Office Space Vacancy Rate at 16% and Still Falling

Times Staff Writer

The vacancy rate for South Bay office space continued its downward trend in the first quarter of this year, dropping nine points from the same period last year to 16%, according to a survey released last week by a major commercial real estate brokerage firm.

The vacancy rate is expected to drop another percentage point in the next quarter when a number of current negotiations are completed, said Jack Rosenberg, vice president and general manager of the South Bay office of Grubb & Ellis Co., the firm that conducted the survey.

Although the addition of more than 5.5 million square feet of new office space scheduled to be completed in the next two years is expected to push vacancies up to nearly 20% by the end of 1987, Rosenberg said the vacancy rate should drop back down to about 16% in 1988.


Good Company

“We’re still in a good economy, and should be for the next couple of years,” he said, “so I think you’ll see some of this space being absorbed quickly. If you wanted to move into the El Segundo area, for example, space is tight.”

Michael Condon, a commercial real estate sales consultant for Coldwell Banker in Torrance, agreed that the vacancy rate has dropped to about 16% and said he shares the feeling that, despite the expected increase in construction, there should be enough companies looking to expand to keep the vacancy rate stable.

Condon noted that Ashton-Tate, a computer software manufacturer that moved last fall from Culver City to a 123,000-square-foot facility in the Harbor Gateway, recently agreed to lease another 115,000 square feet in an adjacent building.

Broke Ground

Ground was recently broken in that area for three projects totaling 660,000 square feet of space, which would bring the total office space there to more than 2.5 million square feet, he said.

The Grubb & Ellis survey of buildings 20,000 square feet and larger in an area from Los Angeles International Airport to Long Beach showed that as of March 31, about 3.3 million of an existing 20.3 million square feet of office space remained vacant.

The El Segundo/Manhattan Beach area--where many aerospace companies are located--continues to be the busiest of seven sub-markets in the South Bay and Long Beach, with its vacancy rate dropping to 5.3%. Rosenberg said an additional 370,000 square feet of office space is under construction in that area, which would increase the total square footage there to more than 8.3 million, nearly three times more than any other area in the South Bay and Long Beach.

According to the firm’s figures, the highest vacancy rate in the South Bay is in Carson, where about 250,000 of the 600,000 square feet of office space, or nearly 42%, remains vacant.

Rosenberg said the major reason for the high vacancy rate is that a 200,000-square-foot building at Wilmington Boulevard and 220th Street has remained empty for about three years. Richard Cannon, president of Watson Land Co. in Los Angeles, which owns the building, said landscaping and architecture have been changed at the two-story building.

“We’re confident we’ll lease it soon,” Cannon said. “Carson has historically been the largest and most active industrial market in the area. Commercial office space is just begining to come around.”

According to Rosenberg, there is about 150 million square feet of industrial space in the South Bay and Compton, with 55% to 60% of that amount in the Carson-Compton area. Rosenberg said commercial real estate dealers consider Carson and Compton to be the same market and do not separate the two for statistics.

More Building Planned

Rosenberg said he expects the South Bay region to continue to be popular with companies looking for space, noting that 5.3 million square feet of office space is being planned during the next three years.

“There’s less traffic congestion in the South Bay, better freeway access and lower rents,” he said.

According to Rosenberg, rents in the South Bay are generally 60% to 70% of those charged in the West Los Angeles area, primarily because land is still cheaper here. He said South Bay rents range between $1 and $2.50 per square foot.

“The South Bay is a very dominant market place,” said Cannon, whose Watson Land Co. last year built and leased more than 1.5 million square feet of industrial and office space in the South Bay. “It has a phenomenal location with proximity to ports and to residential communities of diverse economies to accommodate both executives and workers. It’s just a very, very strong market.”

The Grubb & Ellis survey also showed vacancy rates of 28.6% in the Los Angeles International Airport-Century Boulevard area, 23.1% in the Torrance Freeway area (generally along 190th Street), 19.8% in Central Torrance (along Hawthorne Boulevard), 16.8% in suburban Long Beach and 20% in downtown Long Beach.