LA Market Quarterly Overview: Office / Third Quarter 2008 / Quarterly Change - Pg 1
Los Angeles County accounts for nearly 9 million
people in the Southern California commercial real estate
market, occupying 180 million sq.ft. of office space and
900 million sq.ft., of industrial space. Office and industrial
space make up the backbone of the professional and industrial
base that houses the southern California economy. As the
economy fluctuates, national market indicators, such as
employment figures, can affect the local economy and for
example, jobs are gained or lost. Likewise, the need for
office or industrial space follows these trends, albeit
with some lag. By following these market indicators, you
as a tenant in the can position your purchasing power to
your advantage and make market conditions work for you!
Key indicators include:
Los Angeles is a composition of seven distinct sub-markets
for office and industrial space including: Downtown Los
Angeles, the Tri-Cities, the West Side, Mid-Counties, San
Fernando Valley, San Gabriel Valley and South Bay. Each
sub-market is again divided into territories that include
superior locations and less preferable ones. On a product
level, office and industrial buildings range from "A"
Class to "C" class ("A" being most desirable)
with newer buildings (Construction) often providing state
of the art facilities and amenities that demand a higher
market leasing rate.
By comparing the year-on-year percentage changes in the
four key indicators, a tenant can project how landlords
in the market may react, more or less favorably, to a proposal
to lease space. Keep these four key indicators in mind when
researching local markets to position your company in the
best light and take advantage of the market!
OVERVIEW
Los Angeles's Vacancy rate increase: 9.1% / Net Absorption Negative (1,134,004) SF in the Quarter.
The Los Angeles Office market ended the third quarter 2008 with a vacancy rate of 9.1%. The vacancy rate was up over the previous quarter, with net absorption totaling negative (1,134,004) square feet in the third quarter. Vacant sublease space increased in the quarter, ending the quarter at 3,975,552 square feet. Rental rates ended the third quarter at $31.77,
an increase over the previous quarter. A total of 52 buildings delivered to the market in the quarter totaling 1,190,583 square feet, with 4,063,697 square feet still under construction at
the end of the quarter.
ABSORPTION
Net absorption for the overall Los Angeles office market was negative (1,134,004) square feet in the third quarter 2008. That compares to negative (1,834,674) square feet in the second
quarter 2008, negative (1,147,782) square feet in the first quarter 2008, and negative (170,227) square feet in the fourth quarter 2007.
Tenants moving into large blocks of space in 2008 include: Latham & Watkins LLP moving into 286,284 square feet at KPMG Tower; Kaiser Permanente moving into 194,196 square
feet at Media Studios North Phase 1; and Intuit, Inc. moving into 166,683 square feet at LNR Warner Center - Building E.
The Class-A office market recorded net absorption of negative (327,839) square feet in the third quarter 2008, compared to negative (896,873) square feet in the second quarter 2008, negative (669,934) in the first quarter 2008, and positive 151,108 in the fourth quarter 2007.
The Class-B office market recorded net absorption of negative (443,272) square feet in the third quarter 2008, compared to negative (605,720) square feet in the second quarter 2008, negative (289,975) in the first quarter 2008, and negative (89,088) in the fourth quarter 2007.
The Class-C office market recorded net absorption of negative (362,893) square feet in the third quarter 2008 compared to negative (332,081) square feet in the second quarter 2008, negative (187,873) in the first quarter 2008, and negative (232,247) in the fourth quarter 2007.
Net absorption for Los Angeles's central business district was negative (143,624) square feet in the third quarter 2008. That compares to positive 151,486 square feet in the second
quarter 2008, negative (244,457) in the first quarter 2008, and negative (163,374) in the fourth quarter 2007.
Net absorption for the suburban markets was negative (990,380) square feet in the third quarter 2008. That compares to negative (1,986,160) square feet in second quarter 2008, negative (903,325) in the first quarter 2008, and negative (6,853) in the fourth quarter 2007.
VACANCY
The office vacancy rate in the Los Angeles market area increased to 9.1% at the end of the third quarter 2008. The vacancy rate was 8.6% at the end of the second quarter 2008,
8.1% at the end of the first quarter 2008, and 7.6% at the end of the fourth quarter 2007.
Class-A projects reported a vacancy rate of 11.3% at the end of the third quarter 2008, 10.9% at the end of the second quarter 2008, 10.4% at the end of the first quarter 2008, and
9.8% at the end of the fourth quarter 2007.
Class-B projects reported a vacancy rate of 9.3% at the end of the third quarter 2008, 8.5% at the end of the second quarter 2008, 7.8% at the end of the first quarter 2008, and 7.3% at the
end of the fourth quarter 2007.
Class-C projects reported a vacancy rate of 4.4% at the end of the third quarter 2008, 3.9% at the end of second quarter 2008, 3.6% at the end of the first quarter 2008, and 3.4% at the
end of the fourth quarter 2007.
The overall vacancy rate in Los Angeles's central business district at the end of the third quarter 2008 increased to 10.1%. The vacancy rate was 9.9% at the end of the second quarter
2008, 10.1% at the end of the first quarter 2008, and 9.7% at the end of the fourth quarter 2007.
The vacancy rate in the suburban markets increased to 9.0% in the third quarter 2008. The vacancy rate was 8.4% at the end of the second quarter 2008, 7.7% at the end of the first quarter 2008, and 7.2% at the end of the fourth quarter 2007.
