WLA Rebounds From First Quarter Slip

Vacancy in the West Los Angeles market dropped by 60 basis points as the market recovered from major relocations last quarter. Rents continued their ascent, rising by $0.02 to $4.46 PSF FSG. Leasing activity showed continued stability, recording 1,411,600 SF, up 7.2% from last quarter. The West Los Angeles market is poised to add just under 2.1 million SF in the near future as construction and creative conversions deliver. However, only 8.9% 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.

Key Takeaways:

  • The average asking monthly rent for West Los Angeles rose to $4.46 Full Service Gross (FSG) per square foot (PSF), a 5.7% increase year-over-year.

  • Demand bounced back from a soft first quarter by recording positive 341,300 square feet (SF) due partially to absorption gains in Santa Monica and Beverly Hills.

  • The under construction pipeline added five properties, bringing the total number of buildings in the pipeline to fifteen.

  • Investment sales square footage jumped more than five-fold in the second quarter with just under 1,228.3 million SF trading hands.

  • Leasing activity recorded 1,411,600 SF, up 37.0% year-over-year.

Outlook:

The West Los Angeles market rebounded this quarter from the speed bump at the start of 2017. Vacancy, as expected, stabilized and 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.