Los Angeles 3Q Commercial Real Estate Overview

Los Angeles 3Q Commercial Real Estate Overview

The Los Angeles office market continued to see occupancy gains in the
third quarter of 2016. The vacancy rate fell 20 basis points to 10.8% from
the prior quarter, and 100 basis points over last year. Year to date, the
office market has seen nearly 16 million square feet of leasing activity.
Year to date sales activity topped 19 million square feet, representing
a sharp 72% increase over 2015. Average asking direct rents and sale
prices continued to rise. Average asking direct rental rates registered
$2.89/SF, up 6.3% over last year. Brisk sale activity has pushed prices
up 20.5% from the previous quarter. The Los Angeles market remains a
hotbed of activity, as investors and developers continue to invest billions
of dollars into office market real estate. More than 3.4 million square feet of office space is currently under construction, of which 25.3% is preleased.

The strengthening jobs market is contributing to the demand for office
space. Total nonfarm employment in Los Angeles County has increased
by 1.7%, representing a net gain of 73,900 jobs from August 2015 to
August 2016. Employment growth in office occupying sectors grew by
2.9%, representing a net gain of 52,100 new jobs over the same period.

The availability of office sublease space continues to increase. The total
availability of sublease space rose 13% from last year, representing 4.5
million square feet of sublease space on the market. This quarter, the
monthly average asking rent for sublease office space registered $2.76/
SF compared to the monthly average for direct office space at $2.89/SF,
representing a $0.13/SF discount. The gap between direct and sublease
space widened this quarter. Expect sublessors to be motivated to drop
their asking rents heading into the end of the year as the availability of
sublease space increases and space sits longer on the market.


For more information on commercial real estate leasing or sales, please contact

Forrest Blake  “The Negotiator”
Vice President
NAI Capital
16001 Ventura Blvd., Suite 200
Encino, CA 91436
818-933-2365 direct
310-850-2381 cell

DRE License No: 01064174

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