The Los Angeles office market year-to-date experienced a net gain of 884,854 square feet of positive absorption, as reported in Newmark Grubb Knight Frank’s Fourth Quarter Los Angeles Office Market Report. Asking rents in Los Angeles were inching away from the bottom at a very slow pace with virtually no change over the previous quarter. Class A rents remained at $2.94/sf full service gross at year end - up $0.04/sf over fourth quarter 2011. In hot submarkets like Santa Monica and Hollywood/WeHo, the increase in average asking rent is driven by demand for Class A space. Class A rents in Santa Monica are up 3.2% over last year, while the vacancy rate there at 10.5% is the lowest in Los Angeles County.
Key statistics for the Los Angeles office market during the fourth quarter of 2012 are as follows:
• The Los Angeles office market total vacancy closed year end at 16.7%.
• The region experienced a year-to-date total of 884,854 square feet of positive net absorption.
• Year-over-year, monthly asking rental rates for Class A space increased $0.04 to $2.94/sf. Asking rental rates for Class B space increased $0.02 to $2.19/sf.
• Two notable transactions of the quarter were URS Corp.’s lease renewal of approximately 61,877 square feet at 915 Wilshire in downtown Los Angeles. Tishman Speyer purchased Wilshire Courtyard a one-million-square-foot Class A, two-building, office portfolio in the Miracle/ Park Mile submarket.
• Approximately 495,000 square feet of space remained under construction at the close of the fourth quarter.
Chuck Hunt, executive managing director and area manager for Newmark Grubb Knight Frank’s Southern California operations, said, “With demand for office space picking up on the Westside, from entertainment, media and technology companies, there is a renewed momentum driving demand for office space in the South Bay, which presents the best opportunity for tenants to get quality space at lower rates.”
Expect the Los Angeles economy and office market to continue on the path to recovery through the next several quarters as the vacancy rate gradually heads lower. Overall rental rates are expected to rise as the economy gains more strength.
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