Los Angeles Office Market
Net absorption was positive for the 15th consecutive quarter, but down 31.8% from one year ago due to a few tenant consolidations. Vacancy was marginally up from year-end 2016 as over 900,000 square feet in new speculative construction delivered, 35.0% of which was leased upon completion. Hollywood received an absorption boost when Netflix took occupancy of 323,273 square feet of its new ICON space. Vacancy increased in Playa Vista and Downtown Los Angeles when The Brickyard and AT MATEO delivered empty. The overall asking rental rate was up 3.5% from one year ago. A fair share of which is from new construction: The Brickyard, for instance, has a $6.05/SF sticker price.Under construction activity is moderate compared with the last cycle: Just 1.7 million versus 3.0 million square feet in early 2008.
Los Angeles Industrial Market
First-quarter 2017's total asking rent of $0.74/SF was up 9.2% from one year ago; a steeper jump compared with the 7.1% increase from first-quarter 2015 to first-quarter 2016. By property segment, the warehouse sector led in rent growth. This quarter's $0.71/SF rate was up 12.9% from one year ago. Vacancy has been at or below 1.0% for seven-straight quarters, and user demand is not receding for quality blocks of space. Available and existing Class A and B warehouse space lists for an average of 3-5 months before leased. Only 456,167 square feet in new construction delivered this quarter, 65.6% of which had occupiers in place. Quarterly absorption was flat due to renewals, an extremely tight vacancy rate and few modern space options to lease. The best tenants can do is to either renew, compete for new speculative construction or consider space options outside of the market. Under construction activity reached 6.8 million square feet, up 125% from one year ago. Most will deliver over the next nine months, giving tenants shopping the market a few more quality space options. 3PL and e-commerce tenants remain especially active.