LOS ANGELES—Los Angeles isn't the only Southern California city attracting start-ups and tech companies. Orange County is also becoming a major hub for new tech companies and innovation. With these companies serving as a major driver of the Los Angeles office market, should we be worried that Orange County is vying to take a piece of the pie?
Maximilian Saia, senior research analyst at CBRE, says there is no cause for concern. While Orange County has a strong market in its own right, the two regions are focused on different segments of the market. “Orange County is a different entity when it comes to the growing presence of tech companies in the market,” Saia tells GlobeSt.com. “L.A.'s tech community is heavily focused on content creation while the OC tech scene is more slanted toward high-tech services firms. OC's incredible growth in its tech sector over the past several years is evidenced by the fact 36% of all tenants currently seeking office space are tech firms.”
While start-ups are becoming a major component of office demand, Los Angeles is also seeing demand for larger blocks of space from more established tenants. “The market for large tech and media tenants is extremely active,” says Saia. “Obviously, the traditional media companies that have been in LA for decades drive a lot of that activity, but large tech tenants that are pushing into content creation have also been key drivers of demand for large blocks of space.”
This activity is having a significant market impact, and we are seeing it play out in rising rental rates. Asking rents have increased by 4.6% year-over-year in the Greater Los Angeles area. “[These rents] are driven by organic growth and new companies forming or entering the market, enhancing the diverse tenant base, which further strengthened market fundamentals,” says Saia.
LOS ANGELES—Los Angeles isn't the only Southern California city attracting start-ups and tech companies. Orange County is also becoming a major hub for new tech companies and innovation. With these companies serving as a major driver of the Los Angeles office market, should we be worried that Orange County is vying to take a piece of the pie?
Maximilian Saia, senior research analyst at CBRE, says there is no cause for concern. While Orange County has a strong market in its own right, the two regions are focused on different segments of the market. “Orange County is a different entity when it comes to the growing presence of tech companies in the market,” Saia tells GlobeSt.com. “L.A.'s tech community is heavily focused on content creation while the OC tech scene is more slanted toward high-tech services firms. OC's incredible growth in its tech sector over the past several years is evidenced by the fact 36% of all tenants currently seeking office space are tech firms.”
While start-ups are becoming a major component of office demand, Los Angeles is also seeing demand for larger blocks of space from more established tenants. “The market for large tech and media tenants is extremely active,” says Saia. “Obviously, the traditional media companies that have been in LA for decades drive a lot of that activity, but large tech tenants that are pushing into content creation have also been key drivers of demand for large blocks of space.”
This activity is having a significant market impact, and we are seeing it play out in rising rental rates. Asking rents have increased by 4.6% year-over-year in the Greater Los Angeles area. “[These rents] are driven by organic growth and new companies forming or entering the market, enhancing the diverse tenant base, which further strengthened market fundamentals,” says Saia.
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