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Partnership. Performance.
FIRST QUARTER 2015
Los Angeles County Office Market Report
www.avisonyoung.com
New Jersey
Market Snapshot
The Los Angeles County Office Market Shows Little Movement In Q1 As The Vacancy Rate Remains At 16.4%
Los Angeles County has recorded a decrease in the unemployment rate from 8.7% in February 2014 to 7.8% in February 2015. The improvement in the LA County economy was driven by the addition of 101,100 jobs or a 2.4% increase in job growth between February 2014 and February 2015. The industries that led this job growth are educational and health service (+27,400 jobs) and leisure and hospitality (+19,200 jobs). The industry with the largest job losses was manufacturing with a loss of 3,500 jobs.
The Los Angeles County office market recorded positive absorption of 65,700 square feet (sf) in Q1. The total vacancy rate remained at 16.4% and the weighted average asking lease rate increased to $2.73 per square foot (psf) on a full service gross basis (FSG). The asking lease rates range from $1.97 psf in the Hollywood/Mid-Wilshire market to $3.92 psf in the West Los Angeles market.
Net absorption in Q1 was restrained as no market recorded a substantial decrease in the vacancy rate; however, demand for space from West Los Angeles to Downtown Los Angeles continues to intensify. The market that illustrated the least demand for space was the South Bay market, as net absorption was negative 96,200 sf. The vacancy rate ranged from 12.8% in West Los Angeles to 20.6% in South Bay. The most recent quarter the West Los Angeles market had a vacancy rate below 13% was the second quarter of 2009.
New leasing activity in Q1 was 3,001,900 sf compared to 2,772,800 sf in Q4 2014. The building class that recorded the most amount of leasing activity was Class A, accounting for 60% of all leasing activity. The largest leases in Q1 were as follows: Capital Group renewed for 323,000 sf in Downtown Los Angeles, City of Los Angeles leased 126,000 sf in Downtown Los Angeles and Southern California Edison leased 126,000 sf in the San Gabriel Valley.
The investment sales activity in Q1 was extremely vibrant. The largest transactions occurred in the West Los Angeles market. Invesco acquired 13031 W Jefferson Blvd from Worthe Real Estate Group for $316,000,000 or $792 psf, IDS Real Estate Group acquired 8550 Higuera St from Hackman Capital Partners for $108,000,000 or $847 psf and Tishman Speyer acquired 520 Broadway from Vornado Realty Trust for $91,000,000 or $805 psf.
Asking Rent
Vacancy RatesI
Net Absorption
Partnership. Performance.
FIRST QUARTER 2015
Market Overview
Los Angeles County Office Market Report
The improvement in the general economy has provided tenants with the confidence to expand their office space needs. New leasing activity increased in Q1 as tenants became more confident in their business operations. The West LA market did not have an outstanding first quarter in 2015; however, tenant demand still remains strong in that market. The total vacancy level is expected to trend downward for the remainder of 2015 as the new leasing activity translates to tenant move-ins.
*The information reported is based on data pertaining to office properties that are at least 20,000 sf and 2-stories or greater. Rental rates are estimated full service and have been calculated at the monthly rate.
First Quarter 2015 | Los Angeles County Office Market Report
M A J O R L E A S E T R A N S A C T I O N S
SF Buyer
Invesco Real Estate
PriceSeller
Worthe Real Estate Group 399,400
8550 Higuera St, Culver City Hackman Capital Partners $108,000,000
Vornado Realty Trust
16830 Ventura Blvd, Encino Douglas Emmett Management
199 S. Los Robles Ave, Pasadena Ethika Investments Heitman
M A J O R S A L E T R A N S A C T I O N S
SF Completion
Q2 2015280,400
900 Wilshire Blvd, Los Angeles
Hudson Pacific Properties
356,100
12333 Olympic Blvd, Los Angeles
Developer
Kilroy Realty Corporation
U N D E R C O N S T R U C T I O N
The industries driving the strongest demand for space in the Los Angeles office market are entertainment, media, and technology. Entertainment is the largest industry cluster in Los Angeles County
There are 1,855 office buildings in Los Angeles County. Of these, 629 are considered to be Class A office buildings. The market with the highest percentage of Class A square footage relative to its inventory is West Los Angeles
There was a total of $1.2 billion of investment sales volume in Q1 2015. The average sales per square foot in the Los Angeles Office Market in Q1 2015 was $388.
The majority of development activity in the Los Angeles office market consists of the renovation of existing buildings as opposed to ground up construction
Type SF
Renewal
Market
Downtown Los Angeles
City of Los Angeles New Downtown Los Angeles 126,000
Southern California Edison New 2 Innovation Way, Pomona San Gabriel Valley
Nickelodeon Studios New 203 W. Olive Ave, Burbank Tri-Cities 113,800
Yahoo Renewal/Downsize 3333 W. Empire Ave, Burbank 100,000
Tenant
Capital Group
Address
333 S. Hope St, Los Angeles
350 S. Grand Ave, Los Angeles
323,000
$316,000,000
Address
13031 W. Jefferson Blvd, Los Angeles
Hudson Pacific Properties
127,500
$52,500,000
$91,000,000
$89,000,000
163,200
223,700
IDS Real Estate Group
Address
6121 W. Sunset Blvd, Hollywood
Q2 2017Korean Airlines
Q4 2015472,500
520 Broadway, Santa Monica 113,000
Tri-Cities
PSF
$791
$847
$805
$398
$322
Tishman Speyer
*The information reported is based on data pertaining to office properties that are at least 20,000 sf and 2-stories or greater. Rental rates are estimated full service and have been calculated at the monthly rate.
126,000
L o s A n g e l e s M a r k e t s B y T h e N u m b e r s
First Quarter 2015 | Los Angeles County Office Market Report
*The information reported is based on data pertaining to office properties that are at least 20,000 sf and 2-stories or greater. Rental rates are estimated full service and have been calculated at the monthly rate.
First Quarter 2015 | Los Angeles County Office Market Report
Office Markets
Century City 10,845,200 12.7% 12.9% -103,700 $4.39Santa Monica 9,471,200 7.2% 8.1% -26,500 $4.69Beverly Hills 6,953,700 8.4% 9.1% 14,700 $4.78Miracle Mile 5,383,800 13.0% 13.1% 20,100 $3.21Westwood 4,867,600 13.5% 13.8% -3,200 $3.89Culver City 4,042,600 13.1% 14.0% 19,900 $2.70Marina Del Rey/Playa Vista 6,272,400 17.8% 20.4% 20,900 $3.39Brentwood 3,318,200 11.5% 11.7% 62,900 $3.43Olympic Corridor 3,065,000 5.7% 6.0% 24,200 $3.20West Hollywood 2,980,800 21.6% 22.0% 20,000 $4.37West Los Angeles 869,900 13.2% 13.2% -800 $2.62West Los Angeles Market Total 58,070,400 12.0% 12.7% 48,500 $3.92
Existing Inventory
Direct Vacancy
%
Total Vacancy
%
YTD Net Absorption
Average Asking Rents
Financial District 19,139,900 17.9% 18.1% 35,400 $2.99Bunker Hill 8,122,100 23.5% 23.7% -20,800 $3.14South Park 3,525,500 12.9% 13.0% 6,400 $2.70Greater Downtown 2,652,600 15.9% 16.2% -9,100 $2.38Downtown Los Angeles Market Total 33,440,100 18.6% 18.8% 11,900 $3.04
Existing Inventory
Direct Vacancy
%
Total Vacancy
%
YTD Net Absorption
Average Asking Rents
El Segundo/Beach Cities 11,473,800 16.1% 17.2% -69,000 $2.68Downtown Long Beach 5,138,700 20.5% 20.5% 24,900 $2.23Suburban Long Beach 4,523,100 16.5% 16.7% 14,600 $1.90Torrance 4,445,000 13.4% 14.2% -19,300 $2.10LAX 4,417,800 39.7% 39.8% -37,000 $1.56190th Street Corridor 3,485,700 23.3% 23.6% -10,400 $1.84South Bay Market Total 33,484,100 20.3% 20.9% -96,200 $2.09
Existing Inventory
Direct Vacancy
%
Total Vacancy
%
YTD Net Absorption
Average Asking Rents
West San Fernando Valley 15,507,900 16.2% 16.8% 38,700 $2.20Conejo Valley 6,736,400 16.4% 16.7% 58,900 $2.24Central San Fernando Valley 4,805,800 9.6% 10.4% -51,200 $2.42East San Fernando Valley 2,321,500 16.4% 16.4% 23,900 $2.30Santa Clarita Valley 2,304,500 14.5% 14.8% -10,400 $2.38LA North Market Total 31,676,100 15.1% 15.6% 59,900 $2.25
Existing Inventory
Direct Vacancy
%
Total Vacancy
%
YTD Net Absorption
Average Asking Rents
Pasadena 8,293,200 15.7% 15.8% -10,800 $2.87Burbank 6,869,000 15.5% 17.3% -61,000 $3.09Glendale 6,338,100 15.8% 15.9% 57,100 $2.48Monrovia 1,178,800 18.6% 22.3% 12,600 $2.78Arcadia 622,700 8.8% 8.8% -2,900 $2.04Tri Cities Market Total 23,301,800 15.6% 16.4% -5,000 $2.81
Existing Inventory
Direct Vacancy
%
Total Vacancy
%
YTD Net Absorption
Average Asking Rents
Mid Wilshire 10,517,800 20.9% 21.0% 32,500 $1.66Hollywood 3,262,300 11.6% 11.8% 3,400 $3.54Hollywood/Mid-Wilshire Market Total 13,780,100 18.7% 18.8% 35,900 $1.97
Existing Inventory
Direct Vacancy
%
Total Vacancy
%
YTD Net Absorption
Average Asking Rents
East San Gabriel Valley 6,609,100 13.8% 13.8% 15,900 $1.99West San Gabriel Valley 3,537,400 12.8% 12.8% -5,200 $2.06San Gabriel Valley Market Total 10,146,500 13.5% 13.5% 10,700 $2.02
Los Angeles County Total 203,899,100 15.9% 16.4% 65,700 $2.73
Direct Vacancy
%
Existing Inventory
Total Vacancy
%
YTD Net Absorption
Average Asking Rents
*The information reported is based on data pertaining to office properties that are at least 20,000 sf and 2-stories or greater. Rental rates are estimated full service and have been calculated at the monthly rate.
213.935.7435
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Contact Information - United States
213.935.7430 323.851.6666
www.avisonyoung.com
310.899.1800424.257.6474
Los Angeles - Downtown 555 S Flower St, Ste 3200Los Angeles, CA 90071 Primary Contact: Ted [email protected]
Los Angeles - North6711 Forest Lawn DrLos Angeles, CA 90068 Primary Contact: Mark Evanoff [email protected]
Los Angeles - West10940 Wilshire Blvd, Ste 2100 Los Angeles, CA 90024 Primary Contact: Jonathan Larsen [email protected]
Los Angeles - Santa Monica 301 Arizona Ave, Ste 303 Santa Monica, CA 90401 Primary Contact: Randy [email protected]
San Diego - La Jolla4225 Executive Sqr, Ste 600 La Jolla, CA 92037Primary Contact: Jerry [email protected]
858.201.7070
Orange County - Irvine 2030 Main Street, Ste 150 Irvine, CA 92614Primary Contact: Dan [email protected]
949.757.1190 [email protected]
Report Prepared By:Nash Midzi - Research Manager 555 S Flower St, Ste 3200Los Angeles, CA 90071
Regional Managing Director: Chris Cooper - Corporate 555 S Flower St, Ste 3200 Los Angeles, CA 90071
© 2015, Avison Young (Canada) Inc. The statistics contained in this report were obtained from sources deemed reliable, including Avison Young, Bureau of Labor Statistics, CoStar Group Inc., Real Capital Analytics, Inc., Reis Services, LLC, State of CA Employment Development Department, U.S. Green Building Council. However, Avison Young (Canada) Inc. does not guarantee the accuracy or completeness of the information presented, nor does it assume any responsibility or liability for any errors or omissions. All opinions expressed and data provided herein are subject to change without notice. This report cannot be reproduced in part or in full in any format without the prior written consent of Avison Young (Canada) Inc.
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In 2009, Avison Young began international expansion and has since opened 44 U.S. and 3 European offices.
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In 2013, Avison Young requalified as one of Canada’s 50 Best Managed Companies.
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