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LACKLUSTER ACTIVITY CREATES COMPETITION
AMONG LANDLORDS
A deficiency in credit availability coupled with a downturn in consumer spending continue to plague the US economy, forcing many companies to either downsize their operations or go out of business altogether. Tenants in the West Los Angeles office market have responded to a weak economy by opting to sublease space sooner as witnessed by a 30 basis point rise in sublet vacancy, enabling direct vacancy to rise 40 basis points, settling at 8.2% for the quarter. Negative absorption persists, totaling -200,400 SF, bringing the 2008 total to -551,500 SF. This amounts to a 1.1% decrease in occupancy over a year ago period, which with all things considered, is not as bleak as the overall economy would indicate.
Rental rates decreased 2.5% over the previous quarter, ending at $3.83 PSF and are expected to decrease further into 2009. Rising vacancies across most submarkets in West LA have put landlords in the uncomfortable position of having to lower rates to maintain occupancy levels. Ironically, the larger concession packages offered to tenants by landlords in previous quarters are falling out of favor as landlords feel the need to conserve cash. Many are choosing to cut rental rates rather than offer larger tenant improvement allowances. Also, tenants continue to remain hesitant to sign any long term deal, opting for short term leases. This enables tenants to stay flexible amidst uncertainty in the economy.
Contact Evan Parry at 213.532.3247 for more information.
  OFFWLA08Q4.pdf
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