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CONTINUED SLOWING IN THE LOS ANGELES BASIN
OFFICE MARKET
Net absorption in the Los Angeles Basin during Q1 2008 was negative 1.9
million SF, with Orange County accounting for negative 1.1 million SF of
the Basin-wide total. The primary cause of the downturn was the release
of large amounts of space by the mortgage-finance industry, which is heavily
concentrated in Orange County as well as in various other sub-markets such
as the San Fernando Valley. It also was influenced by further slowing
in the economy. The Basin’s vacancy rate climbed to 13.2%, up from 12.4%
last quarter and from 10.8% one year ago. Despite this increase,
asking rental rates continued to climb, although at a much slower pace
than in previous quarters.
The general consensus among economists is that the economy will continue
to slow throughout the remainder of 2008, and a growing number project
a recession. Also, the downturn in the mortgage-finance industry
is not yet over. Net absorption is projected to be negative for the
year in most submarkets. Vacancy rates are projected to climb by
another one to two percentage points, and rental rates are expected to
flatten or even drop in some areas. Fortunately, we entered this
downturn with relatively low vacancy rates, and construction activity has
slowed significantly from last year. As a result, the long-term outlook
for the market remains favorable.
Contact Michael Gold at 213.532.3247 for more information.
  OFFLAB08Q1.pdf
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