The Los Angeles County office market notched another solid quarter for landlords as rents moved up and occupancy held steady.
Expanding technology companies such as shopping app Honey again led the way in the third quarter, real estate brokerage CBRE reported, part of a pattern of growth that has held since the L.A. office market started to come back from the 2008 recession.
“It took Southern California awhile to get into recovery mode,” said Petra Durnin, the brokerage’s director of research for the region, “but since 2013 we have had very steady rent growth.”
Average asking rents for Class A buildings was $3.71 per square foot a month in the third quarter, up from $3.62 in the same period last year and a penny higher than it was in the second quarter.
Tech-related companies, including many based in the San Francisco Bay Area such as Google and Netflix, have rented 2.75 million square feet in the L.A. area since 2015 and helped propel the office market out of the recession, Durnin said.
Tech’s growth also has boosted co-working office firms such WeWork, she said, because they house individuals and small firms that service tech companies. Co-working operators and other shared-space providers occupy nearly 4.5 million square feet in the L.A. market, according to CBRE.
The biggest office lease in the third quarter was signed by homegrown L.A. tech company Honey, which provides an online coupon tool that aggregates discount codes for shoppers. Honey agreed to occupy all 130,000 square feet in a former Coca-Cola plant in downtown’s Arts District.
Such big leases are part of a trend in L.A. and other major markets that real estate brokerage Savills Studley described as top heavy because the big fish are gobbling up offices to keep growing.
“Larger firms, particularly tech and creative sector companies, have remained aggressive in their pursuit of talent and space,” Savills Studley said in a report. “In contrast, smaller and midsized companies have been increasingly restrained recently.”
The restraint is most apparent on the Westside, where average Class A rents have climbed rapidly since the recovery to $5.14 a square foot in the third quarter, up from $4.96 a year earlier and $5.12 in the previous quarter.
Though rents have been rising, Los Angeles County office vacancy has remained flat at 14.2% in the third quarter, compared with 14.4% both last quarter and a year earlier. That’s happening in part because firms in some sectors, such as law and finance, are taking less space when they renew.