LOS ANGELES—The greater Los Angeles area saw a 1.7% increase inemployment during the third quarter, compared to last year,according to the 3Q14 office report from Cushman &Wakefield. The report shows that the Los Angelesoffice market is beginning to gain momentum due toan overall healthy quarter with “significant growth that elevatedmarket fundamentals to an unprecedented level.”

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"The office market in Los Angeles has been struggling for a longtime while the rest of the U.S picked up," Petra Durnin, managingdirector of research at Cushman & Wakefield, tells GlobeSt.com."There were some glimmers of improvement for few quarters but now,along with data that backs up the feeling of improvement, thesentiment from landlords and brokers alike is that the Los Angelesoffice market is beginning a positive trend. The demand from theTAMI sector is buoying the L.A. market."

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At a glance, the office market is performing well. Vacancy ratesin the greater Los Angeles area dropped 1.5% year-over-year to 17%,while direct asking rents climbed by 3.5%. For class-A properties,rents averaged $2.89 per square foot, an additional 1.9% increase.Overall, the quarter saw 1.1 million square feet of absorption, themost of any quarter since 2008. Year-over-year absorption is 2.3million square feet. According to Durnin, this is the mostsurprising finding in the report. "The level of activity in thirdquarter was most surprising. Leasing activity and vacancy have beensteadily improving, but of the year-to-date 2.3 million square feetof occupancy gains, 1.1 million square feet occurred in just thethird quarter, the most for any quarter since the recession," shesays.

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Leasing transaction activity, though, was down 5.1%year-over-year with 9.8 million total square feet leased during thequarter; however, the report estimates that the market will surpass2013 total leasing activity this year. Non-traditional users makeup the majority of the leasing transactions, in fact the creativeand tech industries are driving much of the job growth. LADECclaims that L.A. now has more high-tech employees than any otherU.S. region. These industries are impacting office activity innearly every submarket. The leasing highlights from the quarterinclude Universal Music Group's201,000-square-foot renewal at 2220 Colorado Ave. andEdmunds.com's lease for 133,036 square feet at2401 Colorado Ave.

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As for sales activity, the third quarter saw an improvement ascompared with the first half of the year. A total of 2.9 millionsquare feet of office properties traded hands this quarter, acrossproduct types. That brings the year-to-date total to 9.7 millionsquare feet, compared to 15.3 million square feet sold last year.The sale of 801 Tower in Downtown Los Angeles isthe highlight acquisition of the quarter. The property traded hands recently for $197 million.

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West Los Angeles is still leading the greater Los Angeles areawith a 13% vacancy rate, the lowest of any other L.A. submarket,and an average gross rental rate of $3.53 per square foot, thehighest of any other submarket in Los Angeles. Los Angeles Centralhas the highest amount of office space under construction by far,with 883,161 square feet in the pipeline; however, this area alsohad a negative absorption rate during the quarter and a 20% vacancyrate. Vacancy rates in the remaining submarkets range from 14.2% to23.2%, with rental rates ranging from $1.94 to $2.67 for theremaining submarkets.

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Kelsi Maree Borland

Kelsi Maree Borland is a freelance journalist and magazine writer based in Los Angeles, California. For more than 5 years, she has extensively reported on the commercial real estate industry, covering major deals across all commercial asset classes, investment strategy and capital markets trends, market commentary, economic trends and new technologies disrupting and revolutionizing the industry. Her work appears daily on GlobeSt.com and regularly in Real Estate Forum Magazine. As a magazine writer, she covers lifestyle and travel trends. Her work has appeared in Angeleno, Los Angeles Magazine, Travel and Leisure and more.