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SOUTH BAY OFFICE MARKET ENDS 2009 WITH CAUTIOUS OPTIMISM BUT DISTRESS LOOMS ON THE HORIZON
After a year which saw vacancy rates in the South Bay office market climb back to 2006 levels and leasing activity reaching an all-time low, it appeared that the market may have bottomed. Although the overall vacancy rate increased slightly from the previous quarter to 16.1%, Q4 2009 saw a few office tenants move to the South Bay indicating that the lower cost of doing business and the amount of high quality office space in the area is drawing tenants from elsewhere in the region.
Direct weighted average asking rents remained at $2.00 per square foot, per month Full Service Gross (FSG) for the third consecutive quarter. Net absorption for the quarter was -11,200 SF bringing net absorption for 2009 to -653,400 SF. As the rate of office space givebacks has slowed dramatically since the first half of 2009, it appears that the market may have already bottomed. On the other hand, with more expected office moveouts in the first quarter of 2010 and projected minimal job growth, we expect the office vacancy rate to stay in the mid-teens through 2010.
Contact Michael Soto at 213.532.3220 for more information.
  OFFSB09Q4.pdf
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