L.A. office market off to slow start this year but still healthy
Los Angeles County’s office market has been expanding and rents have been rising for years — and thanks to companies like Netflix, that dynamic continued in the first quarter.
The Los Gatos, Calif., movie-streaming company is taking all the space of a large Hollywood building that opened its doors in the beginning of the year.
Terms of the lease with developer Hudson Pacific Properties for the 323,000-square-foot Icon building were not disclosed, but landlords typically ask for about $5.50 a square foot in monthly rent for new Hollywood offices, well above the county-wide rate.
That rate hit an average of $3.13 per square foot a month in the first quarter, up from $3.03 in the prior quarter and $3 in the same period a year earlier, according to real estate brokerage CBRE Group Inc.
Rents have been rising since 2013 and some observers expect the market to cool, but Petra Durnin, CBRE’s director of research and analysis, said landlords remain in the driver’s seat.
“The market is still healthy,” she said. “I know the sentiment out there is that things are slowing down, but we still see quite a bit of road ahead of us in the market.”
The market is still healthy.
— Petra Durnin, CBRE, director of research and analysis
New jobs are still being created in the region, albeit at a tepid pace. That means “there is room for a little rent growth and for vacancy to come down a bit more,” Durnin said.
New office construction grew the market by nearly 750,000 square feet last quarter, a jump from the 100,000 square feet delivered in the previous quarter and 460,000 square feet a year earlier. There are now about 205 million square feet of offices in Los Angeles County, according to CBRE.
Overall vacancy was 14.1% in the first quarter, a rise from 12.8% at the end of 2016 but down slightly from 14.8% a year ago.
Twitter: @rogervincent
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