Seslen: u201cA paradigm shift in the way tenant firms use office space will force landlords and developers to rethink their investment strategies.u201d

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LOS ANGELES-Office and industrial recovery is reaching more areas of Los Angeles and Orange counties as well as the Inland Empire, according to a recently released report, “The 2012 Casden Industrial and Office Forecast from the University of Southern California,” which analyzes economic data through the third quarter of this year, provided by Newmark Grubb Knight Frank, on rents, vacancies and transactions for office and industrial markets in Los Angeles, Orange, Riverside and San Bernardino counties. The report shows that these sectors are experiencing increased occupancy and rental rates for the second consecutive year.

Twelve out of 14 industrial submarkets and 13 of 17 office submarkets studied in these regions saw growth in occupancy, while 10 industrial submarkets and five office submarkets saw increased rental rates. The rental-rate figures improved slightly over the eight industrial and four office submarkets that experienced rental-rate increases last year.

“We predict office-market rents to stabilize in as little as six months, but a sustained recovery could be many years off,” said Tracey Seslen, Ph.D., author of the study, in a prepared statement. “A paradigm shift in the way tenant firms use office space will force landlords and developers to rethink their investment strategies even as the economy improves.”

Seslen added that the outlook will improve for the remaining 12 office submarkets, where rents are declining at a slower pace and nearing stabilization. Major economic indicators including GDP, unemployment and consumer confidence have also been inching up, coinciding with these slow but steady improvements in the commercial real estate market from January through September of this year.

Seslen said she sees office vacancy rates remaining below pre-crisis levels as long as the region’s office supply remains constrained. On the industrial side, while occupancy and rents are predicted to continue increase over the next two years, the rate of improvement will depend on stock and other economic factors.

“A building boom has begun once gain in the Inland Empire, and could temper the improvements in rents and vacancy rates that otherwise would have occurred,” Seslen said. “The magnitude of the changes will also depend on manufacturing output, oil prices, US monetary and fiscal policy and sovereign risk in Europe.”

For the complete report, click here.

As reported in April, the 2012 Casden Multifamily Forecast from the University of Southern California Lusk Center for Real Estate predicted more growth in the multifamily market over the next two years. The annual checkup, which was presented in April, analyzed four apartment markets—Los Angeles, Orange, and San Diego counties and the Inland Empire—and had shown across-the-board improvements in rents and vacancy rates in 2011.