Recent years have been testing for landlords with office space to rent in Los Angeles but businesses across the city are now believed to be growing in confidence and optimism about their own prospects going forward.
Relative positivity in business communities has a knock-on effect for office space circumstances and local analysts believe that the commercial property woes of recent years could soon be all but forgotten.
“We are essentially bumping along the bottom right now,” Jow Vargas from Cushman & Wakefield told the Los Angeles Times recently.
After 12 consecutive quarters during which office space rental prices fell in Southern California, most LA office brokers have been pleased to see that at least “rents are not going down any more” and there is tentative confidence that 2011 will be a better year than 2010 for the local market.
However, Mr Vargas suggested in his interview that it will be another couple of years and 2013 before any “huge upswing” is witnessed in the market for Los Angeles office space.
Taking the American office market as a whole, Cushman and Wakefield reported recently that 2010 saw positive absorption rates across the country for the first time since 2007, news taken as a “promising sign for the US office market’s recovery”.
Meanwhile, the same firm reported this month that office leasing activity in Manhattan, New York, saw a “heartening uptick” during the final three months of last year.
Editor’s notes: In the first quarter of 2023, there was 2.2 million square feet of new office space being constructed in Los Angeles which is lower than the previous quarter where there was 3.7 million square feet of space under construction.
Looking ahead at the rest of 2023, new starts will likely be delayed by higher interest rates and higher construction costs caused by global uncertainties.
In Q1 of 2023, there was 2.19 million square feet of negative absorption in the first quarter of 2023, however, this is an improvement on the previous quarter where there was 2.5 million square feet of negative absorption.
The vacancy rate across Los Angeles stood at 18.6% made up of 16.6% direct from landlords and 2% in the subletting market.
This translated to 69.4 million square feet of available office space in Los Angeles and 11 million square feet of that is office space by sublease from an existing tenant.
Despite the vacancy rates, the costs to lease best-in-class office space had risen over the previous quarter from $40.76 per square foot per year to $41.04 per square foot.