July 5, 2016
CBRE’s SoCal research head Petra Durnin says there is a host of upbeat welcome signs reflected in Los Angeles’ second-quarter office market data points. In fact, the numbers show that all of the key drivers in L.A.’s diverse economy contributed to employment growth, and highlight the fact that companies with Los Angeles-based operations were confident enough to continue to hire and expand amidst a backdrop of global uncertainty.
Durnin adds, “The strength of the LA office market lies in tenant diversity, which drove activity through the first half of 2016. Occupancy gains pushed down vacancy and stimulated year-over-year rent growth. Despite concerns of a slowdown, employment growth over the next year will keep fundamentals strong and continue to attract global investors.”
Other key highlights of the quarter included:
- Net absorption in Q2 2016 was positive in nine out of the 10 major submarkets.
- Tri-Cities experienced the steepest decline in vacancies of any LA submarket.
- Office-using employment will expand 2.6% in LA County over the next four quarters*.
- Greater Los Angeles overall asking lease rates increased to $2.93 from $2.91 per square foot, per month from the previous quarter, and rose 5.4% over the past four quarters.
- Vacancies began to fall below historic averages.
- Significant office investment activity in Greater Los Angeles took place in the first half of 2016. Notable transactions occurred in almost every submarket, with the largest ones in DTLA.
- Institutional investors, both foreign and domestic, took notice of favorable supply demand dynamics and continued to place capital across the office market.
* CBRE Econometric Advisors