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May 18, 2024
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L.A. Office Market Still on Track Despite Slight Vacancy Rate Increase in 2nd Quarter 2017


The second quarter of 2017 saw the Los Angeles office market vacancy tick up 10 basis points to 11.4%, as 705.5k sf of office space was completed during the quarter, according to the latest research provided by NAI Capital. This included the first new office tower constructed in Downtown in over 30 years, that being the 73-story, 372.8k sf Wilshire Grand Center, which opened its doors this quarter.

Average asking direct rental rates in Los Angeles County registered $3.02/sf, steady over the prior quarter, and up 6.3% over last year. The average asking rent for Class A office space in Los Angeles County is up 7.5% over last year, while Class B is up 2.7% over the same period. New construction is driving up the average asking rent for Class A office space.

According to Joseph Faulkner, Executive Managing Director with NAI Capital’s Downtown office, “The office market continues its impressive performance. Hollywood is still exploding, Westside rents are still at all-time highs and Downtown is getting more hard looks from tech and media firms. Tenants will have sticker shock when facing renewals and the creative office phenomena will continue to squeeze more people into less space to afford rent.”

Sales activity this quarter totaled 5.7 msf compared to last quarter’s 6.5 msf, and 8.4 msf sold last year at this time. The decline in sales square foot volume is attributed to lack of product for sale and rising sale prices. The average sale price for office space sold in LA County is up 31% over last year.

Despite new construction delivered this quarter, occupancy rates have remained relatively steady as a strong jobs market continues to drive demand for office space. Approximately 4.6 msf of office space remains under construction. Year-to-date, as of the second quarter of 2017, completed new construction totaled 1.5 msf. As new construction is delivered to the office market, vacancy rates will inch upward.

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