Growth among Los Angeles-area companies, especially those in fields related to technology and entertainment, kept the office rental market stable last quarter.
Neighborhoods such as El Segundo and the Westside are most popular with such creative tenants, according to real estate brokerage CBRE.
“We’ve been hearing about El Segundo as the next choice for tech tenants for some time now,” said Petra Durnin, director of research and analysis at the brokerage. “The data strongly correlates that now.”
On Friday, Dr. Patrick Soon-Shiong, who is expected to take ownership of the Los Angeles Times later this month, announced he was moving the newspaper to a new campus in El Segundo.
The office vacancy rate in El Segundo was nearly 20% in 2011, Durnin said, but had fallen to 6.9% by the first quarter of this year. Average asking rents climbed from about $2.50 per square foot per month to about $3.50 in the same period.
Old office buildings and industrial properties dating to the mid-20th century that served the aerospace industry are being upgraded to modern offices.
Among the larger El Segundo office leases in the first quarter were a 28,000-square-foot expansion by pharmaceutical company Kite Pharma and a 21,336-square-foot lease by candy maker Sugarfina.
In downtown Los Angeles, office vacancy remains high, as it has been for many years, but rents are ticking up because many tenants are migrating downtown and taking space that has been recently vacated or added to the market.
“It’s good for more product to keep coming,” CBRE broker Todd Doney said of new office space. “I think we’re going to have a couple of really good first quarters of 2018.”
Los Angeles County’s average asking rent was up slightly at $3.49 from $3.46 a year ago but down from $3.67 in the fourth quarter. Overall vacancy was 14.9%, up from 14.1% a year ago and 13.9% in the fourth quarter.