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CENTRAL LA OFFICE SUBLEASE VACANCY TO 1.3% WITH ASKING RENTS HOLDING
Economic headwinds that were initiated by the turmoil in US financial markets are having a prominent effect on Downtown LA’s most venerable tenants. The 1st quarter kicked off to a discouraging start with the dissolution of law firms Heller Ehrman and Thelen Reid. Both firms gave back nearly
150,000 SF worth of space helping contribute to a 40 basis point rise in total vacancy, arriving at 14.0%. Net absorption was negative for the 6th straight quarter, ending at -172,400 SF. Rental rates remained more resilient than in the neighboring markets of Tri Cities and West LA, however, the increases in vacancy put further pressure on rental rates, ending the quarter down 1% to $30.96 PSF.
Leasing activity was down significantly over the 4th quarter in the absence of deals over 100,000 SF. Activity ended the quarter at 469,600 SF with renewal and sublease activity representing 29% of total activity, down from 36% at the end of 2008. While rental rates appear to be holding up, new deals are being negotiated under generous concessions that are lowering effective rents for tenants. Landlords remain aggressive in retaining existing tenants in order to mitigate any foreseeable exposure to near term vacancies. This is especially true as many landlords try to maintain cash balances for looming debt covenants in 2009 and 2010. Conditions are not likely to improve for the remainder of 2009 as availability is expected to increase, a direct result of downsizing announcements by local companies.
Contact Evan Parry at 213.532.3247 for more information.
  OFFCLA09Q1.pdf
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