West L.A. Office Recovers in 2Q

The West L.A. office market has rebounded from its first quarter slowdown. According to the second quarter report from Colliers International, asking monthly rent in West Los Angeles increased to $4.46 (full service growth) per square foot, an increase of 5.7% year-over-year. Absorption was also strong in the quarter, with 341,300 square feet of leasing activity, driving vacancy down. Investment activity saw the most impressive increase, increasing five times over the first quarter with nearly 1,228.3 million square feet trading hands. With such strong activity in the second quarter following a meek start to the year, we wondered if this means more stagnant growth. Nico Vilgiate, EVP at Colliers International, sat down with us for an exclusive interview to talk more about the market.

GlobeSt.com: Is the West L.A. market hitting a plateau?

Vilgiate: West L.A. has skyrocketed over the last three or four years with pretty robust growth, particularly when you compare it to the last 20 years of my career. It is clearly hitting an all-time high when it comes to cap rates and price per square foot on investment sales. There has been a lot of tenant activity and robust growth over the last several years, and every now and then a quarter needs to have some cooling because you can't have constant accelerated growth. Sometimes it is more tepid. I still feel like West L.A. has the ability to record positive absorption. That may be tempered a little bit with some of the projects under construction or repositioned and added to the inventory in the market. Overall, West L.A. is one of the most important addresses for new media, technology, entertainment and buyer industries that support those creative industries.

GlobeSt.com: How has this market grown in the last few years?

Vilgiate: Years ago, you could buy buildings in West L.A. for $400 per square foot, now the bar is at $1,000 or higher. Those are exponential type jumps, and the market and rents need to catch up to those numbers. It is proven real estate, and it is highly desirable. We have rail going through the market and it is going to continue to expand, so I always think that this will be a market that will always experience more growth on a consistent basis than tepid growth.

GlobeSt.com: What types of tenants are active in the market? Are you seeing new tenants as well as established tenants expanding in the market?

I think new companies will continue to expand in West L.A. because there is a lot of private capital from Silicon Valley and Silicon Beach. Those companies will go from one round of funding to three or four and the next thing you know, they are a mature company. Then, there are companies like Hulu that didn't have the same brand or viewership as Netflix, but now they are expanded into new media.

GlobeSt.com: What is your outlook for the market?

Vilgiate: I think that the market is going to perform in a positive manner, and I think we will see continued leasing absorption. I also anticipate a modest reduction in vacancy, mainly because we have new projects that are sizable to meet the demand. Whenever you add more inventory there is a time lag to lease up that space.

The West L.A. office market has rebounded from its first quarter slowdown. According to the second quarter report from Colliers International, asking monthly rent in West Los Angeles increased to $4.46 (full service growth) per square foot, an increase of 5.7% year-over-year. Absorption was also strong in the quarter, with 341,300 square feet of leasing activity, driving vacancy down. Investment activity saw the most impressive increase, increasing five times over the first quarter with nearly 1,228.3 million square feet trading hands. With such strong activity in the second quarter following a meek start to the year, we wondered if this means more stagnant growth. Nico Vilgiate, EVP at Colliers International, sat down with us for an exclusive interview to talk more about the market.

GlobeSt.com: Is the West L.A. market hitting a plateau?

Vilgiate: West L.A. has skyrocketed over the last three or four years with pretty robust growth, particularly when you compare it to the last 20 years of my career. It is clearly hitting an all-time high when it comes to cap rates and price per square foot on investment sales. There has been a lot of tenant activity and robust growth over the last several years, and every now and then a quarter needs to have some cooling because you can't have constant accelerated growth. Sometimes it is more tepid. I still feel like West L.A. has the ability to record positive absorption. That may be tempered a little bit with some of the projects under construction or repositioned and added to the inventory in the market. Overall, West L.A. is one of the most important addresses for new media, technology, entertainment and buyer industries that support those creative industries.

GlobeSt.com: How has this market grown in the last few years?

Vilgiate: Years ago, you could buy buildings in West L.A. for $400 per square foot, now the bar is at $1,000 or higher. Those are exponential type jumps, and the market and rents need to catch up to those numbers. It is proven real estate, and it is highly desirable. We have rail going through the market and it is going to continue to expand, so I always think that this will be a market that will always experience more growth on a consistent basis than tepid growth.

GlobeSt.com: What types of tenants are active in the market? Are you seeing new tenants as well as established tenants expanding in the market?

I think new companies will continue to expand in West L.A. because there is a lot of private capital from Silicon Valley and Silicon Beach. Those companies will go from one round of funding to three or four and the next thing you know, they are a mature company. Then, there are companies like Hulu that didn't have the same brand or viewership as Netflix, but now they are expanded into new media.

GlobeSt.com: What is your outlook for the market?

Vilgiate: I think that the market is going to perform in a positive manner, and I think we will see continued leasing absorption. I also anticipate a modest reduction in vacancy, mainly because we have new projects that are sizable to meet the demand. Whenever you add more inventory there is a time lag to lease up that space.