L.A. Office Market Firms Up

Los Angeles County’s office market firmed up a bit in the second quarter as occupancy and rents ticked up slightly.

The overall vacancy rate, including space available for sublease, was 16.1%, down from 17.9% in the second quarter of 2003, according to a report by real estate brokerage Cushman & Wakefield. The average monthly rent was $2.07 a square foot, up 2 cents from a year earlier.

The numbers don’t reflect the rising level of activity in the market as growing numbers of tenants search for new space or negotiate extensions on their leases, real estate brokers said.

“I think we are going to see growth in leasing and sales up to the November election, at a bare minimum,” said Joe Vargas, Cushman’s senior managing director. “I am very encouraged with the market as it is right now.”

Landlords on the Westside, the county’s largest market, grew more aggressive in luring tenants by cutting rents; the Westside average fell 9 cents to $2.58 a square foot. The vacancy rate also fell, to 16.1% from 17.6%.

Although still leaning toward a tenant’s market, Westside rents may have stabilized, said Chris Houge of Madison Partners, a tenant broker in West Los Angeles.

Among the larger leases on the Westside last quarter were online shopping search engine BizRate.com’s move from Marina del Rey to 39,000 square feet in Westside Media Center in Los Angeles and executive search firm Korn/Ferry International’s agreement to move from one Century City building to 40,000 square feet in another.

Vacancies in downtown Los Angeles, the next-largest market after the Westside, came down slightly more than 2 percentage points to 17.7% as the average rent moved up 5 cents to $2.09 a square foot.

Recent activity suggests that rents and leasing activity downtown may soon be headed upward, said Brett White, president of Los Angeles real estate brokerage CB Richard Ellis.

Several office buildings and vacant parcels have traded hands in the last two years at increasingly higher prices as large investors bet that downtown will heat up again after more than a decade in the doldrums. Investors have been encouraged by the addition of Staples Center and Walt Disney Concert Hall, along with the burst of residential development. Several rail lines now serve the area.

“There is a lot going on downtown that leads people to believe that finally the dynamics that must be in place to make this a good office market again are in place,” White said.

One of the largest leases downtown in the second quarter was a $50-million agreement by SBC Communications Inc. to move its offices to 215,000 square feet in Transamerica Center.

The county’s weakest office hubs in the April-June period included downtown Burbank, with a 28.7% vacancy rate and average rent of $2.06 a square foot, and the commercial district around Los Angeles International Airport, with a vacancy rate of more than 30% and an average rent of $1.42.

The South Bay market from the airport to Long Beach remained among the softest in the county, with an average vacancy of 18.9% and rent of $1.86. The South Bay, which suffered from business losses in its key industries of aerospace, defense and technology, is still trailing the region, Vargas said.

Burbank’s Media District was one of the strongest markets, with a 4.8% vacancy rate and average rent of $2.72.

In the San Fernando Valley, vacancy in Woodland Hills was 8% and average rent was $1.89. In Westlake Village, vacancy was under 10% and average rent was $2.06. In Encino, the average vacancy was 11.2% and the average rent was $2.02.