Southern California Office Real Estate Blog

3Q Drop-Off in Office Absorption Rates but SoCal still Strong

October 27, 2007 on 11:56 am | In Fascinating Information, Fascinating Office Real Estate Information, Lights Camera Transaction, Office Fodder, Uncategorized | 7 Comments

 

 

 3Q Drop-Off in Office Absorption Rates
 

 
 

The national office market posted net absorption of 18.9 million square feet in the third quarter, the second-lowest quarterly net absorption in the last 3 1/2 years, according to CoStar Group’s Third Quarter 2007 Office and Industrial Report. Only the first quarter of this year posted a lower net absorption figure. Through the end of the third quarter, net office absorption totaled 61.5 million square feet versus 90.3 million at the same time last year, a decline of slightly more than 32%.
 

 

 

 Overall, net office absorption is down in 32 markets compared with last year and up in just 19 markets. The picture isn’t much better in the industrial markets. Net industrial absorption is down in 30 markets and up in just 21.
 

Through Sept. 30, net industrial absorption totaled 124.5 million square feet versus 185.1 million at the same time last year. That, too, is a decline of slightly more than 32%.
 

 

 

Office
 

The entire decline in net office absorption this year has occurred in the suburban office markets — 45.08 million this year vs. 74.71 million in the same time frame last year. That’s a falloff of 40%.
 

On the other hand, central business district (CBD) net absorption has gone up this year to 16.46 million, about 1 million more square feet than was absorbed last year at this time.
 

Net absorption is off more than 80% this year in many markets along the Atlantic Coast: Broward County, FL; Orlando, Northern New Jersey, Baltimore and South Florida. It was also off that percentage in Austin, Las Vegas and St. Louis.
 

Two markets have negative net absorption so this year. Memphis posted a negative 180,006 square feet and Palm Beach County, FL, registered a negative 509,383 square feet.
 

Net absorption more than doubled this year compared with last year in Richmond, VA, 1.16 million square feet and Nashville at 1.15 million square feet. It also picked up strength heading west, more than doubling in Indianapolis, 1.1 million, San Antonio, 529,189, Salt Lake City, 995,459, East Bay/Oakland, 520,271 and San Diego, 2.22 million.
 

The overall U.S. office market ended the third quarter at a vacancy rate of 11.1%, virtually unchanged over the last five quarters.
 

The vacancy rate in Class A properties has been improving all year from 11.8% at the start of the year to 11.5% now. Again, the improvement is in the central business districts. In Class A CBD properties, the vacancy rate has dropped from 10.4% at the start of the year to single digits at 9.7%. In the suburbs it has gone up from 11.3% to 11.6%.
 

Class A is also improving at the expense of Class B, which reported a vacancy rate of 12.2% at the end of third-quarter 2007, up from 11.9% at the start of the year.
 

The average quoted asking rental rate for available office space, all classes, was $23.81 per square foot per year at the end of the third quarter. This is more than $1 higher than at the start of the year and represents a 4.8% increase.
 

 

 

Written by Mark Heschmeyer
 

http://www.costar.com/News/Article.aspx?id=37CED496ACD4DA279E7C9A310BDBE146&ref=100
 

 

 

Copyright (c) 2007 CoStar Realty Information, Inc. All rights reserved.
 

 

Fire photos:
 

http://news.nationalgeographic.com/news/2007/10/photogalleries/wildfire-pictures/photo8.html
 

 

 

 

 

Experts Predict that Wild Fires Won’t Affect the California Economy

October 26, 2007 on 8:34 pm | In Fascinating Information, Fascinating Office Real Estate Information, PROPERTY MAINTENANCE, Uncategorized | 4 Comments

 

 Experts Predict that Wild Fires Won’t Affect the California Economy

Though the 16 fires that are engulfing San Bernardino, Riverside, Los Angeles and San Diego counties will produce devastating short-term effects for many home and business owners, the economy will apparently be granted a reprieve.

 

 Some of the 881,500 Southern California evacuated residents found that their homes are among the 1,155 (as of Wednesday October 25, 2007) were destroyed. But, as bleak of a situation as this seems, however, economists believe that once the immediate devastation passes very little long-term effects will be felt. “We’re obviously in the midst of a housing recession: prices are falling and the building industry is getting hammered,” Christopher Thornberg, a Los Angeles economist and principal at Beacon Economics, tells GlobeSt.com. “But with the fires, the impact here is probably somewhat positive. We have a situation where there will be rebuilding, which will provide a little boost to an industry in tough shape.”

According to California’s Employment Development Department, the construction industry has lost 28,600 jobs since September, which is a 3% decline from 2006.

However, with the current wildfires primed to become one of the most expensive fires in the nation’s history, and State Farm currently having received 1,351 claims and 251 reports of homes being destroyed, the construction industry should experience a pick up in business.

As for businesses, current estimates state that about 500 businesses have been destroyed by the fires while many others have been evacuated. Large San Diego tenants such as Jack in the Box, Qualcomm, Sony and Hewlett-Packard had to partially or completely halt their operations early this week as fire officials were unable to extinguish and contain the various fires due to dry weather and high winds. These closures, as well as the closures of many retailers, post offices and tourist attractions such as SeaWorld and the Wild Animal Park, are again set to have only short-term effects on business and tourism.

“Large events create a certain degree of disruption,” Thornberg says. “Next quarter we’ll see a big bounce in the economy. The economy will be stimulated and businesses will be catching up. The business [disrupted] is business to be delayed–not business to be canceled. Mail will go out next month. Deals will close next month. All businesses have built in a certain degree of slack… . As for tourism, it’s Southern California, it’s San Diego. It will be fine.”

Thornberg also notes that although many disasters of this kind can’t be avoided, there are measures that can be put in place to prevent widespread damage to businesses and homeowners in the future

“Unfortunately, people are given incentive to not worry about risk because the government happily steps in and bails them out,” he says. “People say, ‘this is a great place to live and I don’t have to deal with the consequences of a fire.’ But we should be aware of the fact that when you build in canyons and wilderness areas, yes it provides a great lifestyle but it puts you at risk. We as a society condone this risk at the taxpayers’ expense. How many times are you going to rebuild a business or a gated, high-end neighborhood in the middle of the San Diego wilderness before we say ‘you should know better’?”

By Nellie Day 

http://www.globest.com/news/1021_1021/sandiego/165416-1.html?type=pf

$130M FOR WESTWOOD OFFICE TOWER

October 15, 2007 on 10:27 pm | In Fascinating Office Real Estate Information, Lights Camera Transaction, Office Fodder, Uncategorized, Winning Properties | 4 Comments

$130M FOR WESTWOOD OFFICE TOWER 

 

 Murdock Plaza, a 17-story, 228,540-sf office tower on Wilshire Boulevard in Westwood, has sold for $130 million or $569 per sf. Sumitomo Life Realty Inc. of New York is selling the 94%-occupied building to Wilshire Westwood Plaza LLC, a private Los Angeles investment group. The land beneath the building continues to be owned by two local private trusts. 

 

Situated at the intersection of Wilshire and Westwood boulevards, the circa-1980 brick-skinned building was developed by billionaire investor David Murdock of Dole Foods, who still keeps an office in the building. Designed by Langdon Wilson, the building is well known as the home of the prestigious Regency Club, which occupies the top two floors, and many of its members. 

 

The building’s tenants include Eli Broad and the Broad Foundation; Castle & Cooke; Mapleton Investments; former Mayor Richard Riordan/the Riordan Foundation and Riordan, Lewis & Haden; Wachovia Securities; Spyglass Entertainment; the executive search firm Spencer Stuart; Radar Pictures; Union Bank; and Comerica Bank. 

 

According to Cushman & Wakefield, the average office rent in Westwood now stands at $4.35 per sf per month, up nearly 40% from this time last year.

Info courtesy of Brian K. Miller of GlobeSt.com