LA Market Quarterly Overview: Office / Third Quarter 2008 / Quarterly Change - Pg 2
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!
LARGEST LEASE SIGNINGS
The largest lease signings occurring in 2008 included: the 418,666-square-foot deal signed by Fox Interactive Media at Horizon at Playa Vista - Bldg 1 & 2 in the West Los Angeles market;
the 345,377-square-foot lease signed by Raytheon Company at 2200 & 2222 E Imperial Hwy in the South Bay market; and the 330,434-square-foot lease signed by Northrop Grumman
Corp at Continental Tower in the South Bay market.
SUB LEASE VACANCY
The amount of vacant sublease space in the Los Angeles market increased to 3,975,552 square feet by the end of the third quarter 2008, from 3,883,204 square feet at the end of the second quarter 2008. There was 3,516,440 square feet vacant at the end of the first quarter 2008 and 2,961,439 square feet at the end of the fourth quarter 2007.
Los Angeles's Class-A projects reported vacant sublease space of 2,295,825 square feet at the end of third quarter 2008, down from the 2,363,737 square feet reported at the end of the second quarter 2008. There were 2,200,249 square feet of sublease space vacant at the end of the first quarter 2008, and 1,820,836 square feet at the end of the fourth quarter 2007.
Class-B projects reported vacant sublease space of 1,311,531 square feet at the end of the third quarter 2008, up from the 1,210,211 square feet reported at the end of the second quarter
2008. At the end of the first quarter 2008 there were 1,044,866 square feet, and at the end of the fourth quarter 2007 there were 885,161 square feet vacant.
Class-C projects reported increased vacant sublease space from the second quarter 2008 to the third quarter 2008. Sublease vacancy went from 309,256 square feet to 368,196 square feet during that time. There was 271,325 square feet at the end of the first quarter 2008, and 255,442 square feet at the end of the fourth quarter 2007.
Sublease vacancy in Los Angeles's central business district stood at 525,124 square feet at the end of the third quarter 2008. It was 573,195 square feet at the end of the second quarter 2008, 608,866 square feet at the end of the first quarter 2008, and 617,791 square feet at the end of the fourth quarter 2007.
Sublease vacancy in the suburban markets ended the third quarter 2008 at 3,450,428 square feet. At the end of the second quarter 2008 sublease vacancy was 3,310,009 square feet, was
2,907,574 square feet at the end of the first quarter 2008, and was 2,343,648 square feet at the end of the fourth quarter 2007.
RENTAL RATES
The average quoted asking rental rate for available office space, all classes, was $31.77 per-square-foot per year at the end of the third quarter 2008 in the Los Angeles market area. This
represented a 1.4% increase in quoted rental rates from the end of the second quarter 2008, when rents were reported at $31.34 per-square-foot.
The average quoted rate within the Class-A sector was $35.43 at the end of the third quarter 2008, while Class-B rates stood at $27.69, and Class-C rates at $26.26. At the end of the
second quarter 2008, Class-A rates were $34.79 per-square-foot, Class-B rates were $27.57, and Class-C rates were $25.98.
The average quoted asking rental rate in Los Angeles's CBD was $31.05 at the end of the third quarter 2008, and $31.86 in the suburban markets. In the second quarter 2008, quoted rates were $30.20 in the CBD and $31.52 in the suburbs.
