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CENTRAL LA OFFICE MARKET ENDS 2008 IN BETTER SHAPE THAN OTHER MARKETS
While constrained debt markets and a drop off in consumer spending continue to take their toll on the US economy, the Central Los Angeles office market seems to be weathering the economic turmoil in stride, with only marginal changes in vacancy and availability. Total vacancy increased 10 basis points to 13.6% with sublet vacancy remaining unchanged for the quarter. Net absorption was negative for the 5th straight quarter, ending at -10,700 SF, bringing the 2008 total to
-747,900 SF. Rental rates continue to retrace off their record highs set back in 1Q 2008, decreasing 3.3%, settling in at $31.20 PSF.
Leasing activity was significantly higher this quarter compared with the previous quarter, coming in at 951,900 SF. Early renewals and “blend and extend” deals contributed to a majority of the increase in activity, with tenants focusing on lowering their costs amidst an ailing economy. Landlords remain aggressive in retaining tenants through concession packages and in many cases are approaching existing tenants 3-4 years befor their leases expire. This is especially true given the mounting pressure landlords are receiving from lenders as major debt covenants come due in 2009. While conditions are likely not to improve, a 75 point decrease in availability this quarter should help mitigate any downward pressure on rental rates moving into 2009.
Contact Evan Parry at 213.532.3247 for more information.
  OFFCLA08Q4.pdf
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