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RISING VACANCIES AND DECLINING RENTS IN THE CENTRAL LOS ANGELES OFFICE MARKET
The third quarter saw -97,600 SF of net absorption as companies continued to consolidate space in the Central Los Angeles office market. While the rate of deterioration in office market fundamentals has not been as pronounced as in other office markets within the Los Angeles Basin, the total vacancy rate increased 40 basis points from 14.2% reported in Q2 to 14.6% reported in Q3. Downtown Los Angeles vacancy rates continued to rise ending the quarter at 15.1%.
Although leasing activity was up over last quarter, it continued to remain low with only 311,000 SF as most tenants have favored short-term renewals due to the still-extreme uncertainty in the economy. As a result of this diminished tenant demand, direct weighted average asking rental rates declined to $30.12 per square foot, per annum Full Service Gross (FSG) in Q3 from $31.20 PSF in Q2. With landlords offering aggressive concessions in order to attract and retain tenants, average effective rental rates have been decreasing as well.
While the Central Los Angeles office market continues to be one of the better performing office markets within the Greater Los Angeles Basin, office market fundamentals are expected to remain weak with low leasing activity, declining rents, and rising vacancies as long as the lack of employment growth continues.
Contact Michael Soto at 213.532.3220 for more information.
  OFFCLA09Q3.pdf
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