Market Activity Declined During Fourth Quarter
The San Fernando Valley and Ventura County office market recorded negative net absorption at 49,000 square feet, and vacancy declined by 20 basis points in the fourth quarter. Asking rental rates recorded $2.33 PSF FSG, a 4.3% year-over-year increase. With only one new project under construction on the horizon, the market will remain supply-constrained and absorption is expected to remain flat to slightly positive. Given these market conditions, San Fernando Valley and Ventura County office market trends are expected to move at a slow rate.
Overall vacancy for the market increased from 13.9% to 14.1% during the fourth quarter. A longer historical perspective shows that the vacancy rate a year ago stood at 14.6%. Net absorption recorded -49,000 square feet in the fourth quarter, a decrease from last quarter’s 38,800 square feet. The negative absorption stemmed from three submarkets recording negative movement. The weighted average asking rent for direct space increased to $2.33 PSF FSG from $2.32 one quarter ago. This marks a high point for average asking rental rates since the mid-2010’s rate of $2.28.
The San Fernando Valley and Ventura County office market closed the fourth quarter with negative movement while net absorption recorded -49,000 square feet.
The office market vacancy rate increased by 20 basis points to 14.1%.
Rental rates increased by $0.01 from third quarter to $2.33 per square foot (PSF) full service gross (FSG).
No new projects were delivered in the fourth quarter. One project is currently under construction totaling 218,300 square feet.
The Los Angeles County unemployment rate declined to 4.1%, a decrease of 80 basis points from last quarter. The start of the holiday shopping season drove up employment in trade, transportation and utilities by 27,600 jobs.
Vacancy rates in the San Fernando Valley and Ventura County market should remain stable through the first half of 2018 due to lack of new construction. As vacancy continues to be stable, both absorption and leasing activity are expected to remain positive through the first half of 2018. As vacancy rates remain stable, asking rental rates will continue to increase. No new inventory will be delivered in 2018. Minimal federal interest rate increases should help keep investment activity steady through the end of 2018.