FIRST QUARTER 2015 Los Angeles County Office Market Report Partnership. Performance. www.avisonyoung.com
New Jersey FIRST QUARTER 2015 Los Angeles County Office Market Report Partnership. Performance. Market Snapshot Rent Market Overview The Los Angeles County Office Market Shows Little Movement In Q1 As The 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. Rates I 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. Net 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. 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.
First Quarter 2015 Los Angeles County Office Market Report MAJOR LEASE TRANSACTIONS Tenant Type Address Market SF Capital Group Renewal 333 S. Hope St, Los Angeles Downtown Los Angeles 323,000 City of Los Angeles New 350 S. Grand Ave, Los Angeles Downtown Los Angeles 126,000 Southern California Edison New 2 Innovation Way, Pomona San Gabriel Valley 126,000 Nickelodeon Studios New 203 W. Olive Ave, Burbank Tri-Cities 113,800 Yahoo Renewal/Downsize 3333 W. Empire Ave, Burbank Tri-Cities 100,000 MAJOR SALE TRANSACTIONS Address Buyer Seller Price SF PSF 13031 W. Jefferson Blvd, Los Angeles Invesco Real Estate Worthe Real Estate Group $316,000,000 399,400 $791 8550 Higuera St, Culver City IDS Real Estate Group Hackman Capital Partners $108,000,000 127,500 $847 520 Broadway, Santa Monica Tishman Speyer Vornado Realty Trust $91,000,000 113,000 $805 16830 Ventura Blvd, Encino Douglas Emmett Management Hudson Pacific Properties $89,000,000 223,700 $398 199 S. Los Robles Ave, Pasadena Ethika Investments Heitman $52,500,000 163,200 $322 UNDER CONSTRUCTION Address Developer SF Completion 6121 W. Sunset Blvd, Hollywood Kilroy Realty Corporation 472,500 Q4 2015 900 Wilshire Blvd, Los Angeles Korean Airlines 356,100 Q2 2017 12333 Olympic Blvd, Los Angeles Hudson Pacific Properties 280,400 Q2 2015 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 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 The majority of development activity in the Los Angeles office market consists of the renovation of existing buildings as opposed to ground up construction 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.
First Quarter 2015 Los Angeles County Office Market Report Los Angeles Markets By The Numbers
First Quarter 2015 Los Angeles County Office Market Report Office Markets Century City 10,845,200 12.7 12.9-103,700 $4.39 Santa Monica 9,471,200 7.2 8.1-26,500 $4.69 Beverly Hills 6,953,700 8.4 9.1 14,700 $4.78 Miracle Mile 5,383,800 13.0 13.1 20,100 $3.21 Westwood 4,867,600 13.5 13.8-3,200 $3.89 Culver City 4,042,600 13.1 14.0 19,900 $2.70 Marina Del Rey/Playa Vista 6,272,400 17.8 20.4 20,900 $3.39 Brentwood 3,318,200 11.5 11.7 62,900 $3.43 Olympic Corridor 3,065,000 5.7 6.0 24,200 $3.20 West Hollywood 2,980,800 21.6 22.0 20,000 $4.37 West Los Angeles 869,900 13.2 13.2-800 $2.62 West Los Angeles Market 58,070,400 12.0 12.7 48,500 $3.92 Financial District 19,139,900 17.9 18.1 35,400 $2.99 Bunker Hill 8,122,100 23.5 23.7-20,800 $3.14 South Park 3,525,500 12.9 13.0 6,400 $2.70 Greater Downtown 2,652,600 15.9 16.2-9,100 $2.38 Downtown Los Angeles Market 33,440,100 18.6 18.8 11,900 $3.04 El Segundo/Beach Cities 11,473,800 16.1 17.2-69,000 $2.68 Downtown Long Beach 5,138,700 20.5 20.5 24,900 $2.23 Suburban Long Beach 4,523,100 16.5 16.7 14,600 $1.90 Torrance 4,445,000 13.4 14.2-19,300 $2.10 LAX 4,417,800 39.7 39.8-37,000 $1.56 190th Street Corridor 3,485,700 23.3 23.6-10,400 $1.84 South Bay Market 33,484,100 20.3 20.9-96,200 $2.09 West San Fernando Valley 15,507,900 16.2 16.8 38,700 $2.20 Conejo Valley 6,736,400 16.4 16.7 58,900 $2.24 Central San Fernando Valley 4,805,800 9.6-51,200 $2.42 East San Fernando Valley 2,321,500 16.4 16.4 23,900 $2.30 Santa Clarita Valley 2,304,500 14.5 14.8-10,400 $2.38 LA North Market 31,676,100 15.1 15.6 59,900 $2.25 10.4 Pasadena 8,293,200 15.7 15.8-10,800 $2.87 Burbank 6,869,000 15.5 17.3-61,000 $3.09 Glendale 6,338,100 15.8 15.9 57,100 $2.48 Monrovia 1,178,800 18.6 22.3 12,600 $2.78 Arcadia 622,700 8.8 8.8-2,900 $2.04 Tri Cities Market 23,301,800 15.6 16.4-5,000 $2.81 Mid Wilshire 10,517,800 20.9 21.0 32,500 $1.66 Hollywood 3,262,300 11.6 11.8 3,400 $3.54 Hollywood/Mid-Wilshire Market 13,780,100 18.7 18.8 35,900 $1.97 East San Gabriel Valley 6,609,100 13.8 13.8 15,900 $1.99 West San Gabriel Valley 3,537,400 12.8 12.8-5,200 $2.06 San Gabriel Valley Market 10,146,500 13.5 10,700 $2.02 13.5 Los Angeles County 203,899,100 15.9 16.4 65,700 $2.73
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