Bravo! The pundits are predicting that the Los Angeles office market will make some headway this year after lollygagging for the previous four years. Even formerly quiet office zip codes like 90025 and 90034 are picking up steam as the Silicon Beach coastal office market of Venice, Santa Monica, Marina del Rey, Mar Vista, Playa Vista and Culver City continues to see shrinking vacancy rates.
Let us look at Marcus & Millichap’s 2014 Market Outlook; it’s full of good news for the Los Angeles Real Estate market for a change.
◆ 2014 National Office Performance Index Rank for Los Angeles is 5 – up 3 places from last year. Our rise is attributed to strong rent gains and high absolute job growth.
The Employment Development Department (EDD) notes that in Los Angeles County, the seasonally adjusted unemployment rate in March was 8.7% – down from the year ago rate of 10.1%.
◆ Employment Forecast: Employers will create 81,000 jobs this year, expanding payrolls by 2.1%. Office-using employment will grow 2.6% as 26,000 positions are generated.
In California, nearly every major private industry sector added jobs over the year: construction; trade, transportation and utilities; information; professional and business services; educational and health services; leisure and hospitality; and other services. Professional and business services posted the largest gain on a numerical basis, adding 88,100 jobs over the year (up 3.8%). Construction increased the number of payroll jobs by 5.9% (adding 37,100 jobs).
◆ Investment Forecast: The potential for rising interest rates and an increase in the number of CMBS loans that are coming due should encourage more buyers to deploy capital in office assets.
As Loopnet notes, Current Los Angeles market trends data indicates an increase of +4.9% in the median asking price per sq ft for Office properties compared to the prior 3 months, with an increase of +12.8% compared to last year’s prices. County-wide, asking prices for Office properties are 4.4% higher at $283 per sq ft compared to the current median price of $321 per sq ft for Office properties in metro L.A.
◆ Vacancy Forecast: Light construction will facilitate a dip in vacancy to 14.2%.
As Loopnet notes, the average asking rental rate per sq ft/year for Office properties in Los Angeles as of Mar 14 was $25.05. This represents an increase of 0.8% compared to the prior 3 months, with an increase of +4.7% year-over-years. County-wide, average rental rates in L.A. County are +1.1% higher at $24.17 per sq ft/year for Office properties currently for lease.
◆ Construction Forecast: Only 550,000 square feet of office space will come online in 2014, down from 1.2 million square feet last year.
For more information please contact Jodi Summers and the SoCal Investment Real Estate Group @ Sotheby’s International Realty – firstname.lastname@example.org or 310.392.1211, and let us move forward together.
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