With the office sector in Los Angeles seeing its best quarter in end of last year, it is definitely a market to keep an eye on. Absorption rates (or the rate at which open office space is being occupied) were at their highest point since the economic downturn. Let’s look at what is happening in the Los Angeles office market and some of the things shaking it up.
1. Entertainment Commanding More Office Space
Los Angeles is well known for its ties to the entertainment industry, but with new companies coming into the area it is creating demand for more office space. Most notably are technology companies like Netflix, Hulu and Amazon who are diving more into creating original content for their subscribers. With their main headquarters being in the Silicon Valley area, getting a location in the entertainment area of LA is not too far away for them. These technology companies can also be very aggressive when it comes to acquiring the space they desire which helps to create more demand.
2. Big Office Leases
2.1 million square feet were taken up by large office leases in Los Angeles from companies like City National Bank, Kite Pharma and Warner Music Group. According to CBRE, this was the largest in the Los Angeles and Ventura county markets since the year 2000.
3. Bullish Developers
Commercial real estate developers in Los Angeles are becoming very bullish on the office market as demand increases. Jerry Snyder, a Los Angeles developer responsible for the Water Garden in Santa Monica, is one of those bullish developers. Jerry has put his focus solely into the office sector now and is working on three very large projects in the area all at the same time.
4. Slower Recession Recovery
The city of Los Angeles has seen a slower recovery since the recession and this is proving to boost the office market a little more through this year in comparison to other big cities where recovery was a bit faster. While the other cities have flattened out a bit, LA seems to be still going on the upswing.
5. Landlord Concessions
In the West Los Angeles market landlords are providing more incentive for potential tenants to come in and take advantage of these beneficial items. Due to this West LA has seen serious growth with a 10.3% increase in this area in comparison to only a 2.7% increase in Downtown Los Angeles.
6. Smaller Buildings Being Leased
With the technologies companies expanding into entertainment they are only looking for smaller spaces which have gotten eaten up in West Los Angeles. This has put some of the larger projects in waiting for tenants. For example, Waterbridge Capital’s 801 Broadway is just over 950,000 square feet office building but has yet to sign any tenants with a deliver date of late 2017.
These are just a few of the things impacting the LA office sector. Whether you’re looking for space or have a property you’d like to lease, keeping abreast of these trends can help you feel out the market and make the best decisions for you and your business.