West Los Angeles Sees Negative Demand
Vacancy in the West Los Angeles market dropped by 230 basis points as the market saw major relocations cause significant negative absorption in several submarkets. Despite this, rents continued their ascent, rising by $0.10 to $4.44 PSF FSG. Yearly leasing activity showed continued stability, recording 1,317.400 SF, up 2.2% from last quarter’s total.
The West Los Angeles market is poised to add just over 1.5 million SF in the near future as construction and creative conversions deliver. However, only 10.1% of this space has been pre-leased. Leasing efforts for these projects will go a long way in determining whether vacancy stabilizes in the West Los Angeles market or continues to rise.
The average asking monthly rent for West Los Angeles began 2017 at $4.44 Full Service Gross (FSG) per square foot (PSF), a 7.4% increase year-over-year.
Absorption recorded negative 928,000 square feet (SF) due partially to expected move-outs by tenants moving to owned, rather than leased, properties.
West Hollywood, Miracle Mile, Westwood and Culver City all saw significant jumps in vacancy due to negative absorption. The vacancy in Marina Del Rey/Venice rose due to partially
occupied speculative office deliveries.
Investment sales slowed in the first quarter with just under 207.4 million SF trading hands.
Leasing activity recorded 1,317,400 SF, up 29.8% year-over-year.
The West Los Angeles market saw some softening this quarter, but much of the negative demand had been foreseen. Vacancy should stabilize into the year, as leasing velocity remained brisk for the quarter. As such, landlords in some markets are expected to continue pushing rental rates, although not quite at the rate of previous quarters. The construction pipeline remains full, so how much of the space will remain speculative at delivery bears watching as the year progresses.