Overall Market Finishes 2016 With Steady Progress
The Los Angeles County office market recorded 750,400 SF of positive absorption as the total vacancy rate decreased 50 basis points to 15.0%. All submarkets except for San Gabriel Valley and Downtown Los Angeles recorded positive demand.
Rental rates increased $0.01 to $2.99 PSF FSG as core submarkets such as West Los Angeles and Central Los Angeles continued to experience the residual upward pressure seen in 2015 and early 2016, while rental growth in other submarkets slowed. Construction activity remains concentrated in Downtown Los Angeles, West Los Angeles and Central Los Angeles, accounting for 99% of construction in the county.
November 2016 figures for nonfarm employment in Los Angeles County showed unemployment decreasing to 5.1%, a decrease year-over-year from 6.1%. Over the past 12 months, Los Angeles County has gained 65,300 jobs for an increase of 1.5%.
The Greater Los Angeles Basin office market recorded positive net absorption for the 11th consecutive quarter at 890,300 square feet (SF). For the year, the basin totaled 3,623,400 SF of demand, down 7.5% from 2015’s total.
The office market vacancy trends fell by 30 basis points from last quarter at 14.2%. A longer historical prospective shows that the vacancy rate a year ago stood at 15.1%.
Asking rental rates continue to increase at a quarterly average of 1.3%, ending the year at $2.80 per square foot (PSF) full service gross (FSG), a 5.5% gain over last year.
There is currently 5.4 million SF of new construction in the Los Angeles Basin office market of which most is to be delivered in 2017.
The over all economy continued to see solid growth to bring 2016 to a close. Los Angeles Basin unemployment rates have declined from 5.6% to 4.9% year-over-year.
Due to the flurry of deliveries the past two quarters, the construction pipeline has lessened in Hollywood. Projects such as Hudson Pacific's fully preleased ICON and J.H. Snyder’s 1601 N. Vine projects are set to deliver in early 2017. Future construction will provide an abundance of high quality creative space to the market, as Downtown Los Angeles accounts for 48% of all new construction in Los Angeles County. The West Los Angeles market is poised to add just under 1.5 million SF in the near future as construction and creative conversions deliver.
The San Fernando Valley and Ventura County office market trends are expected to move in a slow positive growth rate. South Bay future demand, high-quality traditional and creative space, and rental rates that have seen steady, but not meteoric, increases will continue to attract a variety of media, technology and consumer product tenants.