Office Rents Continue to Climb in L.A. County
Los Angeles County office rents continued to climb during the first quarter of 1997 as landlords benefited from the area’s economic rebound and new construction remained scarce.
“The availability of [prime] office space has shrunk dramatically,” said Howard Sadowsky, regional manager for the real estate firm Julien J. Studley. “The big tenants are feeling the pressure.”
On a countywide basis, the average asking monthly office rent rose to $1.56 a square foot during the first quarter from $1.50 during the same period last year, according to figures gathered by CoStar Realty Information Group, which tracks commercial real estate. The vacancy rate for the January-March period fell to 17.81% from 18.54%.
Landlords in the Westside and the Burbank-Glendale-Pasadena markets, where expanding entertainment companies are gobbling up available space, enjoyed the largest gains in rents and the lowest vacancy rates in the county, according to the survey.
On the Westside, for example, the average asking rent in the first quarter rose nearly 13% from the same period last year, to $2.04 a square foot. Meanwhile, the Westside vacancy rate for the period fell to 12.03% from 13.17%.
The tightening market sometimes finds tenants in prime markets competing for the same pieces of choice space. Seven prospective tenants, for example, are currently vying for space on the 19th floor of a Brentwood high-rise, said Nick Christensen, a broker for the real estate firm CB Commercial.
“Landlords are, for the first time since 1990, able to pick and choose [among] tenants they would favor for their property,” Christensen said.
Even the long-suffering downtown Los Angeles market, where about a quarter of all office space remains vacant, saw asking rents creep up to $1.39 a square foot during the first quarter from $1.27 in the year-ago period. The market has benefited, in part, from the relocation of insurance brokerage firms from other parts of the city, such as the mid-Wilshire and Glendale-Burbank areas, in search of bargain rents in top-quality office buildings.
“Downtown Los Angeles is the best value in Southern California,” said broker Bob Ortiz of Cushman Realty Corp.
While the number of large blocks of empty space is decreasing, there still are many office buildings across the county, including the pricey Westside, where entire floors are empty and existing tenants want to sublet their offices. In addition, the owners of many older commercial buildings are struggling to fill space, let alone raise rents, according to many brokers.
Major new developments are expected to start construction in the Westside and Glendale-Burbank areas within the year. For the most part, however, office rents in the county remain too low to make new construction financially viable, Sadowsky said.
“We have a ways to go yet,” he said.
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RENT HIKE
Owners of office buildings in Los Angeles County--particularly on the Westside and in the Glendale-Burbank area--have been able to demand higher rents as the pool of available space shrinks. Asking rents per square foot per month:
Burbank/Glendale/Pasadena
1997: $1.76
1996: $1.66
*
Westside
1997: $2.04 1996: $1.18
*
San Fernando Valley
1997: $1.59
1996: $1.51
*
South Bay
1997: $1.45
1996: $1.36
*
Mid-Wilshire
1997: $1.39
1996: $1.27
*
Downtown Los Angeles
1997: $1,39
1996: $1.27
*
Countywide
1997: $1.56
1996: $1.50
Sources: CoStar/Realty Information Group
