L.A. County’s office vacancy still shrinking
Office vacancy in Los Angeles County continued to shrink during the fourth quarter, a sign that the local economy is growing steadily as white-collar businesses expand and add workers, according to data released Tuesday.
“This economy has been sustaining itself and looks like it will remain strong,” said Joe Vargas of Cushman & Wakefield, the real estate brokerage that compiled the data. “Job growth will continue to eat away at office vacancy.”
The county’s overall vacancy rate was 10.5% in the fourth quarter, down from 12.3% a year ago. Average asking rents rose 8% to $2.27 per square foot per month, but they were substantially higher in certain desirable markets such as the Westside, where rents are reaching the levels of the dot-com boom years.
Landlords in Santa Monica, where vacancy is less than 6%, are asking for $3.91 a square foot, the highest in the region and a 17% increase from a year ago.
One office building on Lake Avenue in Pasadena is offering space at more than $4, a new record for that city, said real estate broker John Archibald of Coldwell Banker Commercial.
The cooling residential market has not affected demand for commercial space because regional unemployment is below 6% and the number of office jobs is growing as much as 3% annually, Archibald said. His company recently opened an office in Glendale and had a hard time finding support staff.
“Not that many people are looking for jobs, because they’ve already got them,” Archibald said.
“People keep coming here and we keep employing them.”
Rents will continue to rise in Los Angeles County, industry observers predicted, partly because the available supply is shrinking and also because some owners who paid record prices for buildings over the last few years are eager to get more income out of their investments.
“These landlords are going to try to push rental rates” upward, Vargas said. “They have high expectations.”
Even though rents and demand are rising, there has been little new construction in Los Angeles County because construction costs are high and development sites in desirable markets are hard to find.
Only 650,000 square feet of new rental space, mostly in Burbank, was added last year to the county’s base of more than 185 million square feet. Rents are expected to reach a point eventually where more office construction will be justified, but there are few projects in the pipeline now.
Some of the greatest office rental bargains in the fourth quarter were in the perpetually weak district around Los Angeles International Airport, where vacancy rose slightly to 37% and average rent fell 2 cents to $1.41 a square foot.
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*--* Vacancy Rent per Area rate sq. foot L.A.’s Westside 6.5% $3.07 Burbank-Glendale- Pasadena 6.6% $2.52 L.A. central business district 16.3% $2.49 North L.A. County 6.9% $2.19 Long Beach 9.9% $1.96 El Segundo 22.2% $1.78
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Source: Cushman & Wakefield
