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OVER 1 MILLION SF OF NEGATIVE NET ABSORPTION AS TENANTS RELINQUISH SPACE IN DROVES
Shell-shocked by deteriorating economic conditions, many West Los Angeles firms are reigning in costs by either downsizing space or moving to lower cost markets. A wave of sublease space that began at the end of 2007 peaked last quarter at 2.1% of total vacancy, but is now having devastating effects on net absorption as it rolls over into direct space, ending the quarter at -1,037,900 SF. The
increase in space is creating intense competition amongst landlords to attract tenants and maintain manageable occupancy levels. The full extent of landlords’ desperation is enabling tenants to negotiate rents often 10-15% below market rates. Furthermore, tenants looking to renew are finding it more desirable to negotiate short-term extensions under the presumption that falling rents will create greater opportunities on the horizon. Average asking rents fell 3.1% to $3.71 PSF over 4Q 2008 and are now down 8% over a year-ago-period. Total vacancy now stands at 12.5%, aligning the market with levels not seen since 2005. Although, if you compare the current economic recession to the proverbial “tech-bubble” of a decade earlier, than we are far off from the 17% vacancy rates that followed. While the worst may not be over, any decrease in sublease space may prove detrimental to stabilizing the market.
Contact Evan Parry at 213.532.3247 for more information.
  OFFWLA09Q1.pdf
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