Middle Market Digest: This Week in Southwest

The numbers are beginning to roll in from the fourth quarter, and the year was strong for the southwest. Los Angeles posted a strong quarter in all asset classes and Phoenix—no surprise—had a solid year in the industrial market. The Phoenix office market slowed slightly with leasing activity and investment sales, but occupancy and rental rates remained strong. This year, the year has already been healthy, with several investment sales and new construction projects. Here’s a look at this week’s trends, announcements and deals that you may have missed in Southern California, Utah, Arizona and Nevada.

BY THE NUMBERS

LOS ANGELES—The Los Angeles area closed 2017 with a strong fourth quarter. In the industrial market, the fourth quarter was the best of the year, fueled by the added supply from the previous three months and solid demand. The fall and winter demand surge resulted in occupancy gains and a decrease in vacancy. It is expected that occupancy gains will be steady in 2018, reaching more than 2.1 million square feet due to the strong local economy and thriving port activity. The retail market remained stable and optimistic fundamentals, further demonstrating a demand for quality retail opportunities. Vacancy remained unchanged at 5.2%, and leasing momentum remained positive ending Q4 with 231,104 square feet of positive net absorption. Average asking lease rates further increased to $2.71 per square feet with even higher average regional starting and effective rents. In the office market, the year ended with strong occupancy gains in every Los Angeles County submarket, driven by large deals signed by content creators, government tenants and co-working companies. Despite a 90 bps increase in vacancy, the 11% year-over-year rise in asking rents resulted in strong investment activity by institutional investors in suburban submarkets such as El Segundo and Glendale, the more economical options compared with premiums paid on the Westside.