Downtown L.A. Rent Is a Bargain, Survey Says
Downtown Los Angeles remains one of the best bargains in the country for companies wanting to rent prime office space, according to a new study.
Orange County, meanwhile, is the third-most-expensive place to set up shop among seven leading suburban U.S. markets surveyed by Julien J. Studley Inc., a New York-based commercial real estate brokerage.
The “effective” rent for prime office space in downtown L.A. averages $19.88 per square foot per year, according to the survey, which analyzed rents in what it calls “12 bellwether central business districts and markets,” based on rents in 1999.
San Francisco’s office rents are the highest in the country at $54.19 per square foot per year, with midtown New York second at $51.38.
Effective rent, according to Studley, is “the true cost of occupying space for tenants” and differs from the asking rates often quoted in rent surveys. The company says effective rent is a more accurate measure because it analyzes lease concessions, various landlord and tenant expenses and other factors that affect the cost of occupying space.
The survey includes two figures for Los Angeles, the downtown rate and a rate of $31.86 per square foot per year for greater Los Angeles. The second figure is higher because it includes the more expensive office markets on the Westside.
Downtown’s lower rates reflect its continuing oversupply of office space. More than 24% of downtown office space remained empty in the second quarter of this year, according to a report last week by Cushman Realty Corp. That contrasted sharply with a West Los Angeles vacancy rate of 5.7%, “a new historical low,” the Cushman report said.
In what was described as “an anomaly” by broker Royce Sharf of Studley’s Irvine office, the study showed that Orange County’s effective rents in 1999 decreased 7.5% from 1998 rates.
Sharf explained that because hundreds of thousands of square feet of new, high-quality office space was built and leased during 1999 in Orange County, landlords spent huge sums on customizing that space for tenants.
Because the money landlords spend to customize space for tenants is one of the concessions factored into the calculation of effective rent, the money spent by the landlords reduced the average effective rents in the county, Sharf explained. However, he added, asking rents in the county were flat or slightly higher last year and have increased by about 8% to 10% this year.
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Space Race
Office rent in downtown Los Angeles is the greatest bargain among the country’s major urban markets, and San Francisco is the most pricey. Orange County ranks among the most expensive suburban office markets. Rents in annual cost per square foot:
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Urban market:
San Francisco:$54.19
Midtown New York: $51.38
Boston: $41.62
Washington, D.C.: $35.20
Downtown New York: $32.76
Chicago: $32.66
Los Angeles: $31.86
New Jersey: $30.54
Atlanta: $25.55
Philadelphia:$24.28
Houston:$23.31
Downtown L.A.:$19.88
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Suburban market:
Fairfield County, Conn.: $32.34
Long Island, N.Y.: $28.37
Orange County, Calif.: $27.59
Westchester County, N.Y.: $25.50
Cook County, Ill.: $24.16
Northern Virginia: $23.56
Lake/DuPage counties, Ill.: $22.01
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Note: Prices are estimated effective rents, which include lease concessions, various landlord and tenant expenses and other factors.
Source: Julien J. Studley Inc.
