The Los Angeles County office rental market has been on the upswing since 2013 and finished last year in positive territory for landlords as rents rose and the vacancy rate held steady in spite of new office construction.
Although technology and media giants such as Google and Netflix made dramatic moves earlier in the year by committing to big blocks of space, office leasing in the fourth quarter was dominated by small firms moving and expanding, a sign of health for the local business community.
“People are building new businesses,” real estate broker Jeff Pion of CBRE said.
Often these small businesses trade with fast-growing entertainment-related firms including Amazon and Apple as well as show-biz stalwarts such as Walt Disney Co. and NBCUniversal that are riding the peak entertainment wave now streaming on a wide range of electronic devices.
“The convergence of tech, media and entertainment is making Los Angeles the global content capital,” Pion said. “All of the companies that are supporting the content world have to beef up.”
Among the supporters are companies working in advertising, public relations, production and post-production, branding and social media, he said.
Smaller leases are typically 20,000 square feet or less. Google, by comparison, signed a lease for 584,000 square feet in Los Angeles in the first quarter.
The largest lease last quarter in downtown Los Angeles was 60,000 square feet by the Los Angeles Homeless Services Authority, CBRE said. LAHSA is the lead city-county agency addressing homelessness.
City of Hope signed the biggest lease in the county, with a 150,000-square-foot expansion in Irwindale.
Demand for Los Angeles office space “is going to be very strong” this year, Pion said. “I think we will continue to see rental growth, and vacancies will tick down.”
Overall office vacancy in L.A. County was 14.1% in the fourth quarter, virtually unchanged from a year earlier even though several new buildings hit the market and expanded the pool of available space.
The average asking rent for Class A space was $3.66 a square foot, compared with $3.57 a year earlier.