Insatiable demand for creative space on Westside pushes Class B office rents past high-rises
Office rents in Los Angeles County moved up in the second quarter on strong leasing among growing firms in technology and other creative fields such as entertainment and media.
The Westside saw the most rent growth, with landlords asking for $5.12 per square foot per month for Class A space, compared with $4.81 in the same period a year ago and $4.93 in the last quarter, brokerage CBRE said.
In a shift from past trends, though, rent for Westside buildings traditionally considered Class B was notably higher at $5.54 per foot in the second quarter.
The disparity reflects the appetite among many tech and entertainment firms for older buildings such as former warehouses or low-rise campus-style offices with exposed ceilings and polished concrete floors.
Such buildings are categorized by real estate analysts as Class B, even though they are often more desirable than the newer high-rises with fancy, polished-marble finishes that command Class A ratings.
“Polished concrete is the new marble,” said Petra Durnin, a director of research at CBRE. “Polished concrete has taken that spot as a finish that indicates you’re in a quality space.”
The top neighborhoods for occupancy gains and low vacancy were Century City, Culver City and Hollywood, she said.
Among the biggest leases of new space last quarter were the Tennis Channel broadcast network with 60,000 square feet in Santa Monica, Create Advertising Group with 41,000 square feet in Mid-Wilshire and co-working company CommonGrounds with 19,400 square feet in Hollywood.
Tenants in L.A.’s diverse economy will continue to absorb empty office space throughout 2018, Durnin predicted, “but since we’re two years into full employment, the pace of job growth will likely taper in the months ahead.”
L.A. County’s average asking rent for Class A space was $3.70 a foot in the second quarter, up from $3.47 a year earlier and surpassing $3.49 in the first quarter.
Boosted by new construction, overall vacancy was 14.4% in the second quarter, up from 13.7% a year ago but slightly down from 14.9% in the previous quarter.
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