Partnership. Performance. SECOND QUARTER 2014 Los Angeles Office Market Report www.avisonyoung.com
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Partnership. Performance.
SECOND QUARTER 2014
Los Angeles Office Market Report
www.avisonyoung.com
New Jersey
Market Snapshot
Total Vacancy Rate Decreases As Market Fundamentals Strengthen
Los Angeles County has recorded a decrease in the unemployment rate from 10.0% in May 2013 to 8.2% in May 2014. The improvement in the LA County economy was driven by the addition of 89,300 jobs or a 2.2% increase in job growth between May 2013 and May 2014. The industries that led this job growth are educational and health service (+36,400 jobs), health care and assistance (+32,900), and professional and business services (+23,500 jobs). The only industry to experience a reduction in jobs was manufacturing, with a loss of 14,500 jobs.
The Los Angeles office market recorded positive absorption as the mid-year 2014 total vacancy rate decreased 70 basis points since mid-year 2013 to 17.5%. Midway into 2014, the weighted average asking lease rate was $2.67 per square foot (psf) on a full service gross basis (FSG). The difference in market dynamics is illustrated by the range of asking rents in the seven markets within the Los Angeles office market ranging from $1.99 FSG (Hollywood/Mid-Wilshire) to $3.61 FSG (West Los Angeles).
The Los Angeles office market recorded 217,900 square feet (sf) of positive absorption in Q2 relative to 369,600 sf of positive absorption in Q1. The only markets to experience negative absorption in Q2 were Downtown Los Angeles (-86,000 sf), South Bay (-56,600 sf), and San Gabriel Valley (-46,100 sf). The strong demand for creative office space has been very apparent in the West Los Angeles market as the majority of positive absorption was derived from West LA.
New leasing activity in Q2 was 3,748,300 sf with the West LA market accounting for 30% of the leasing activity in the Los Angeles office market. The sales activity in Q2 was not concentrated in any particular market; however, the South Bay market garnered the most activity in terms of the dollar value of investment sales transactions. The average cap rate in the entire Los Angeles office market was 7.1% in Q2 relative to 6.0% in Q1.
Development has ramped up in the Los Angeles office market in certain submarkets as developers seek to participate in the strengthening of market fundamentals. There is a total of 2,758,600 sf under construction or renovation in the Los Angeles office market. The majority of the construction is catered to creative office tenants in Hollywood, El Segundo and the Olympic Corridor. An indication of the strong demand from creative office tenants is evidenced by the Riot Games lease for the entire Element LA campus along the Olympic Corridor.
The Los Angeles office market is experiencing a measured recovery as strong markets continue to strengthen and weaker markets continue to heal. A trend that is expected to continue in the second half of 2014 is that Class B buildings will surpass the other classes in terms of positive net absorption.
Vacancy Rates
Asking Rents
YE09 YE10 YE11 YE12 YE13 1Q14
I
Net Absorption
Partnership. Performance.
SECOND QUARTER 2014
Market Overview
Los Angeles Office Market Report
E. & O.E.: The information contained herein was obtained from sources which we deem reliable and, while thought to be correct, is not guaranteed by Avison Young.
Second Quarter 2014 | Los Angeles Office Market Report
E. & O.E.: The information contained herein was obtained from sources which we deem reliable and, while thought to be correct, is not guaranteed by Avison Young.
M A J O R L E A S E T R A N S A C T I O N S
Buyer SF
DivcoWest
Seller Price
Tishman Speyer 486,800
301 E Ocean Blvd, Long Beach Bantry Holdings $101,700,000
CIM Group Farmer's Insurance Group
660 S Figueroa St, Los Angeles JADE Enterprises
300 N Sepulveda Blvd, El Segundo DivcoWest J.H. Snyder Company
M A J O R S A L E T R A N S A C T I O N S
SF Completion
Q3 2014246,800
900 Wilshire Blvd, Los Angeles
Hudson Pacific Properties
400,000
12333 Olympic Blvd, Los Angeles
Developer
Kilroy Realty Corporation
U N D E R C O N S T R U C T I O N
The industries driving the strongest demand for space in the Los Angeles office market are entertainment, media, and technology. Entertainment is the largest traded industry cluster in Los Angeles County
There are 1,855 office buildings in Los Angeles County. Of these, 628 are considered to be Class A office buildings. The market with the highest percentage of Class A square footage relative to its inventory is West Los Angeles
Sales activity in the Los Angeles office market amounted to $220.2 million year -to-date and there are $299.3 million worth of deals under contract.
The Los Angeles office market has 8,212,800 square feet of proposed office development. The market with the most square footage of proposed development is South Bay
Type SF
Renewal
Market
West Los Angeles
Universal Music Group New LA North 146,600
Deloitte New 555 W. 5th St, Los Angeles Downtown Los Angeles 112,000
U.S. Bancorp Renewal 633 W. 5th St, Los Angeles Downtown Los Angeles 96,000
Anschutz Entertainment Group New 425 W. 11th St, Los Angeles 82,000
Tenant
Universal Music Group
Address
2220 Colorado Ave, Santa Monica
21301 Burbank Blvd, Woodland Hills
201,000
$133,000,000
Address
400 Continental Blvd, El Segundo
C-III Asset Management
396,900
$75,000,000
$91,000,000
$80,000,000
339,100
283,000
Parallel Capital Partners
Address
6121 W Sunset Blvd, Los Angeles
Q3 2017Korean Airlines
Q4 2015446,900
4680 Wilshire Blvd, Los Angeles 402,200
Downtown Los Angeles
L o s A n g e l e s C o u n t y M a r k e t s B y T h e N u m b e r s
E. & O.E.: The information contained herein was obtained from sources which we deem reliable and, while thought to be correct, is not guaranteed by Avison Young.
Second Quarter 2014 | Los Angeles Office Market Report
eles Office Market Report
Office Markets
Century City 10,845,200 12.1% 13.2% 35,600 $4.06Santa Monica 9,471,200 8.4% 8.7% 81,600 $4.14Beverly Hills 6,953,700 9.8% 10.0% 93,400 $4.22Miracle Mile 5,383,800 12.2% 12.4% 40,800 $2.84Westwood 4,867,600 12.0% 13.1% 111,400 $3.41Culver City 4,042,600 13.9% 14.7% 140,200 $2.60Marina Del Rey/Playa Vista 6,272,400 23.0% 25.7% 135,700 $3.30Brentwood 3,318,200 17.3% 18.2% 25,100 $3.20Olympic Corridor 3,065,000 8.5% 8.7% -20,700 $3.11West Hollywood 2,980,800 25.2% 26.1% -42,200 $4.36West Los Angeles 869,900 10.7% 10.7% 22,700 $2.38West Los Angeles Market Total 58,070,400 13.3% 14.1% 623,600 $3.61
Existing Inventory
Direct Vacancy
%
Total Vacancy
%
YTD Net Absorption
Average Asking Rents
Financial District 19,139,900 20.7% 20.9% 209,600 $2.78Bunker Hill 8,429,700 19.7% 20.2% -201,700 $3.03South Park 3,525,500 14.6% 14.8% -187,300 $2.69Greater Downtown 2,652,600 16.6% 17.6% -11,900 $2.20Downtown Los Angeles Market Total 33,747,700 19.5% 19.8% -191,300 $2.84
Existing Inventory
Direct Vacancy
%
Total Vacancy
%
YTD Net Absorption
Average Asking Rents
El Segundo/Beach Cities 11,588,400 17.6% 17.8% 79,200 $2.66Downtown Long Beach 5,301,700 23.0% 23.1% -6,200 $2.09Suburban Long Beach 4,520,500 17.9% 18.0% 58,900 $1.88Torrance 4,445,000 14.4% 14.6% 6,800 $2.08LAX 4,355,100 36.8% 37.7% -6,000 $1.54190th Street Corridor 3,485,700 20.8% 21.0% 49,700 $1.95South Bay Market Total 33,696,400 20.9% 21.1% 182,400 $2.09
Existing Inventory
Direct Vacancy
%
Total Vacancy
%
YTD Net Absorption
Average Asking Rents
West San Fernando Valley 15,507,900 16.1% 16.3% 56,600 $2.21Conejo Valley 6,721,400 18.1% 18.3% -6,900 $2.20Central San Fernando Valley 4,805,800 9.2% 10.3% -39,700 $2.33East San Fernando Valley 2,321,500 20.2% 20.7% 50,700 $2.42Santa Clarita Valley 2,304,500 14.7% 15.0% 13,100 $2.44LA North Market Total 31,661,100 15.7% 16.1% 73,800 $2.25
Existing Inventory
Direct Vacancy
%
Total Vacancy
%
YTD Net Absorption
Average Asking Rents
Pasadena 8,479,500 17.5% 17.9% -195,800 $2.70Burbank 6,869,000 16.6% 19.1% 65,600 $2.99Glendale 6,338,100 21.5% 21.5% 26,100 $2.47Monrovia 1,178,800 9.9% 13.6% -20,900 $2.50Arcadia 622,700 7.2% 7.2% -11,900 $2.08Tri Cities Market Total 23,488,100 17.7% 18.8% -136,900 $2.69
Existing Inventory
Direct Vacancy
%
Total Vacancy
%
YTD Net Absorption
Average Asking Rents
Mid Wilshire 10,517,800 22.2% 22.3% 57,700 $1.67Hollywood 3,226,600 10.7% 11.0% 22,800 $3.40Hollywood/Mid-Wilshire Market Total 13,744,400 19.5% 19.6% 80,500 $1.99
Existing Inventory
Direct Vacancy
%
Total Vacancy
%
YTD Net Absorption
Average Asking Rents
East San Gabriel Valley 6,784,100 18.6% 18.6% -20,500 $2.00West San Gabriel Valley 3,737,000 13.9% 13.9% -6,200 $2.03San Gabriel Valley Market Total 10,521,100 16.9% 16.9% -26,700 $2.01
Los Angeles County Total 204,929,200 17.0% 17.5% 605,400 $2.67
Direct Vacancy
%
Existing Inventory
Total Vacancy
%
YTD Net Absorption
Average Asking Rents
Avison Young, a real estate company committed to you.
Avison Young is the real estate partner businesses trust for intelligent, integrated solutions.
We deliver results that are aligned with your strategic business objectives, support real estate initiatives that add value, and build competitive advantage for your organization.
Avison Young is the world’s fastest-growing commercial real estate services firm. Headquartered in Toronto, Ontario, Avison Young is a collaborative, global firm owned and operated by its principals. Founded in 1978, the company comprises 1,500 real estate professionals in 58 offices, providing value-added, clientcentric investment sales, leasing, advisory, management, financing and mortgage placement services to owners and occupiers of office, retail, industrial and multi-family properties.
Avison Young at a Glance
Contact Information - United States
213.935.7430 323.851.6666
www.avisonyoung.com
310.899.1800424.265.9200
Avison Young is Canada’s largest independently owned commercial real estate services company.
Founded in 1978 as Graeme Young & Associates of Edmonton; Merged with and Avison & Associates in 1996 to form Avison Young.
In 2009, Avison Young began its expansion into the United States and has since opened 41 US offices.
In 2011, Avison Young wins designation as one of Canada’s 50 Best Managed Companies, Canada’s most prestigious corporate award.
In 2013, Avison Young requalified as one of Canada’s 50 Best Managed Companies.
Los Angeles - Downtown 555 S Flower St, Ste 3200Los Angeles, CA 90071 Primary Contact: Ted [email protected]
Los Angeles - North6711 Forest Lawn DrLos Angeles, CA 90068 Primary Contact: Mark Evanoff [email protected]
Los Angeles - West10940 Wilshire Blvd, Ste 2100Los Angeles, CA 90024Primary Contact: Neil Resnick [email protected]
Los Angeles - Santa Monica 301 Arizona Ave, Ste 303 Santa Monica, CA 90401 Primary Contact: Randy [email protected]
San Diego - La Jolla4225 Executive Sqr, Ste 600 La Jolla, CA 92037Primary Contact: Jerry [email protected]
858.201.7070
Orange County - Irvine 2030 Main Street, Ste 150 Irvine, CA 92614Primary Contact: Dan [email protected]
949.757.1190
E. & O.E.: The information contained herein was obtained from sources which we deem reliable and, while thought to be correct, is not guaranteed by Avison Young.
A Growing, Multinational Presence
Report Prepared By:Nash Midzi - Research Manager 555 S Flower St, Ste 3200Los Angeles, CA 90071
Regional Managing Director: Chris Cooper - Corporate 555 S Flower St, Ste 3200 Los Angeles, CA 90071
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