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LOS ANGELES-Surprisingly, even as vacancy rates are climbing in the Los Angeles Basin’s office sector, rents are also rising, according to a recent report by NAI Capital Commercial.

The average rental rate for class A space is currently $2.27 per sf, as compared to $2.16 at year-end 2000, the report says. The highest rents are found in West Los Angeles, where the average rental rate currently stands at $3.24.

This increase in rents has come as vacancy rates are on the rise. The Basin’s direct vacancy rate is at 12%, as compared to 10% at year-end 2000, according to NAI. Meanwhile, net absorption has dropped sharply, the report says. Net absorption totaled negative 1.2 million sf in the first six months of 2001, as compared to positive 5.4 million sf during the last half of 2000.

Vacancy rates are expected to continue climbing, as new office product will continue to be dumped on the office market in upcoming months. Seven million sf of product remains under construction, according to NAI.

If the economy does not improve in the months ahead, this increase in available office space will cause the market to soften, the report says. Rental rates will then begin to drop, putting a halt to the steady increase in rents.

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