Greater L.A. Begins 2020 With Falling Rents
- The Greater Los Angeles Basin office market posted positive demand of 622,500 square feet for the first quarter of 2020. Vacancy dropped accordingly by 40 basis points to
- After totaling 823,300 square feet of deliveries last quarter, construction deliveries totaled just 271,000 square feet to begin the year. Over seven million square feet remain under construction, of which 64% is expected to deliver in 2020.
- Asking rental rate growth recorded 1.3% year-over-year to end at $3.24 per square foot (PSF) full service gross (FSG)
- Space grabs by technology and professional services companies helped push leasing activity to five million square feet for the quarter.
- The Los Angeles County unemployment rate increased from last quarter, ending at 4.5%. Total civilian job growth was essentially flat as the economy maintained full employment.
Los Angeles County Office Market:
Despite the recent market-wide shutdown due to the COVID-19 pandemic, the Los Angeles Basin office market recorded positive market activity in the first quarter as vacancy decreased to 13.7%. In the coming months, it is expected leasing and sale activity will change rapidly. Los Angeles Basin office demand has been led by technology, entertainment and professional services companies. As shelter-in-place orders continue, the impact on economic market conditions will unfold.
The Los Angeles County office market recorded 791,400 square feet of net absorption. Construction deliveries of just 271,000 square feet led to a falling vacancy rate of 14.0%. West Los Angeles accounted for nearly all of total demand for the quarter. Leasing activity, which increased approximately 1.1 million square feet from last quarter, recorded 4.4 million square feet.
The Los Angeles Basin office market is comprised of 314.9 million square feet of multi-tenant office space in buildings 25,000 square feet or larger. It ranks as the third largest office market in the nation, following New York City and the Greater Washington D.C. area. Most of its space, 55%, was built in or after 1985, making it a relatively young market. It is also relatively decentralized, with only 11% of the space located within Downtown Los Angeles and 89% dispersed throughout the region. Low-rise buildings make up 40% of the space, followed by 31% in mid-rise buildings and 29% in high-rise structures.