Westside Leads the Office Market

LOS ANGELES—The office market in Los Angeles is rounding out an incredible year. According to the third-quarter report from Cushman & Wakefield, office vacancy rates in Los Angeles dropped 1.9 percentage points to 15.1% and leasing activity is up 13.8% year-over-year with 11.2 million square feet leased during the quarter and occupancy gains of 2.3 million square feet.

While the whole market has seen improvements, with major leases signed in Hollywood and leasing activity up in Glendale, Playa Vista, El Segundo and West Hollywood led the quarter. “Tech, creative, entertainment and related industries are still driving the market,” Petra Durnin, the Southwest and Denver regional director of research at Cushman & Wakefield, tells GlobeSt.com. “Yahoo took the largest amount of space this quarter in Playa. Glendale also performed well but the activity centered on insurance and boutique law firms.” Overall, rents rose by 7.7% for class-A properties, and are now averaging $3.11 per square foot.

When asked about the challenges in the market, Durnin couldn't names one, saying that the market was really active across submarkets. “Almost universally, vacancy rates dropped in the L.A. submarkets, leasing activity increased as did occupancy gains and rental rates,” she says. “Even Long Beach, which has long been poised for transformation, is beginning to attract creative tenants looking for the next El Segundo.”

We have heard a lot from economic experts about the potential for a recession, or at least another leveling off, in the next three years; however, Durnin doesn't see a plateau in the near future. “There is a solid blue skies trend that is expected to continue through 2016,” she adds. “Market fundamentals growth drivers are stronger than ever. There is even expansion among the same industries that were downsizing not all that long ago.”