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MARKET REPORT DOWNTOWN LOS ANGELES

1Colliers International continuously refines its database. As a result, data reflected in this report may not be consistent with data reported in previous quarters.

MARKET OVERVIEW

The Downtown Los Angeles market in the first quarter 2014 recorded net absorption of negative 137,400 square feet, causing an increase in the total vacancy rate to 20.1 percent from 19.7 percent in the previous quarter. Direct weighted average asking rents reached $34.56 per square foot in the first quarter 2014, as office space with asking higher rental rates became available to the market.

New leasing activity in the first quarter of 2014 was 375,600 square feet relative to 121,500 square feet in the fourth quarter of 2013. The leasing activity was a combination of tenants moving around within the market and some tenants relocating from outside the market.

Sales activity in the first quarter was relatively slow, however, a building that was formerly owned by MPG Office Trust and then taken back by the special servicer in 2012, traded hands. Two California Plaza, located at 350 S Grand Ave, was acquired by CIM Group for $210 per square foot from CW Capital. This transaction completes the transfer of all former MPG Office Trust in Downtown Los Angeles to new ownership.

Vacancy Rate Increases Above 20% As

Space Givebacks Continue

VACANCY 20.1%

NET ABSORPTION -137,400 SF CONSTRUCTION 508,200 SF RENTAL RATE $34.56 PSF UNEMPLOYMENT 8.7%

MARKET INDICATORS - Q1 2014

10%

12%

14%

16%

18%

20%

22%

$31

$32

$32

$33

$33

$34

$34

$35

$35

1Q10 1Q11 1Q12 1Q13 1Q14

% VACANT (TOTAL)

$ PSF FSG PER ANNUM (WEIGHTED)

RENTS VACANCY

HISTORICAL VACANCY VS RENTS

Downtown Los Angeles Office Market Q1 2010 - Q1 2014

HISTORICAL NET ABSORPTION &

CONSTRUCTION COMPLETIONS

Downtown Los Angeles Office Market Q1 2010 - Q1 2014

(350,000) (300,000) (250,000) (200,000) (150,000) (100,000) (50,000) 0 50,000 100,000

1Q10 1Q11 1Q12 1Q13 1Q14

SF

NET ABSORPTION CONSTRUCTION COMPLETIONS

>> Total vacancy rate increases to

20.1% from 19.7%

>> Weighted average asking rental rate

at $34.56 PSF

>> Leasing activity at 375,600 SF

>> Absorption of -137,400 SF recorded

>> Construction activity at

508,200 SF

MARKET TRENDS - Q1 2014

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The total vacancy rate, including sublet space increased to 20.1 percent compared to 19.7 percent last quarter. A longer historical perspective of the total vacancy rate shows that the vacancy rate a year ago stood at 19.1 percent.

Total vacancy rates were highest in the Financial District submarket (23.1%) and lowest in the South Park submarket (12.9%). Vacancy rates were highest for Class C space (22.2%) and lowest for Class A space (19.5%) with Class B space in-between at 20.8 percent.

NET ABSORPTION

Net absorption was negative 137,400 square feet in the first quarter 2014, largely due to the State Bar of California moving out of 169,000 square feet in South Park. The Downtown LA office market continues its trend of negative absorption as it has reported negative absorption for the past four quarters.

The best performing submarket in the first quarter 2014 was the Financial District, it recorded positive 89,700 square feet of net absorption. This can be primarily attributed to the SEC moving into 56,000 square feet at 444

S Flower. The absorption of the SEC provided a new tenant to the market, since the SEC relocated from the West Los Angeles market. Negative absorption is a trend that is expected to continue in 2014 as tenants continue to downsize their space needs. The major upcoming lease expirations in 2014 are not as substantial as in 2015. The anticipated lease signing of Deloitte this year could lead to more space givebacks when Deloitte’s lease at Two California Plaza expires in 2015.

UNEMPLOYMENT

February 2014 figures for nonfarm employment in Los Angeles County showed a recovering job market. Over the past 12 months, Los Angeles County has gained 86,100 jobs for an increase of 2.1 percent. This gain in employment led to the unemployment lowering to 8.7 percent compared to 10.2 percent a year ago.

Year-over-year job gains were most significant in Professional and Business Services (27,000 jobs), Educational and Health Services (25,900 jobs) and Trade, Transportation, and Utilities (15,900 jobs). The largest decline in jobs was seen in Manufacturing (8,800).

LOS ANGELES COUNTY

DEMOGRAPHICS

>>

POPULATION:

10,063,995 (2014 Estimate)

10,423,669 (2019 Projection)

3.57% (Growth 2014-2019)

>>

HOUSEHOLD INCOME:

$75,972 (Average)

$53,125 (Median)

>>

JOB GROWTH:

2.1% (past 12 months)

>>

UNEMPLOYMENT RATE:

8.7% (as of February 2014)

VACANCY BY SUBMARKET

Downtown Los Angeles Office Market Q1 2014

NET ABSORPTION BY SUBMARKET

Downtown Los Angeles Office Market Q1 2014

12.7%

16.5% 17.1% 23.0%

0.2%

0.5%

1.0%

0.1%

0%

5%

10%

15%

20%

25%

SOUTH PARK BUNKER HILL GREATER FINANCIAL

% VACANT

SUBLEASE VACANCY DIRECT VACANCY

(120,700)

(96,200)

(10,200)

89,700

(150,000) (100,000) (50,000) 0 50,000 100,000 150,000

SF

VACANCY

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EXISTING PROPERTIES VACANCY ACTIVITY ABSORPTION CONSTRUCTION RENTS

Submarket/

Class Bldgs Total Inventory

SF

Direct

Vacancy Sublease Vacancy Total

Vacancy

Total Vacancy Prior Qtr

Leasing Activity Current Qtr

SF

Leasing Activity YTD

SF

Absorption Net Current Qtr

SF

Absorption Net YTD

SF

Completions Current Qtr

SF

Under Construction

SF

Weighted Avg Asking Lease Rate FINANCIAL DISTRICT

A 9 9,732,700 22.5% 0.0% 22.6% 23.1% 163,000 163,000 53,100 53,100 0 400,000 $37.56

B 25 8,388,400 23.5% 0.2% 23.7% 24.1% 117,600 117,600 35,400 35,400 0 0 $30.12

C 2 326,400 25.0% 0.4% 25.3% 25.7% 0 0 1,200 1,200 0 0 $23.16

SUBTOTAL 36 18,447,500 23.0% 0.1% 23.1% 23.6% 280,600 280,600 89,700 89,700 0 400,000 $33.84

BUNKER HILL

A 6 7,221,100 17.1% 0.5% 17.6% 16.1% 15,100 15,100 (105,500) (105,500) 0 0 $36.96

B 5 845,400 6.7% 0.0% 6.7% 6.7% 0 0 100 100 0 0 $29.52

C 1 370,200 28.4% 1.3% 29.6% 32.1% 9,600 9,600 9,200 9,200 0 0 $23.52

SUBTOTAL 12 8,436,700 16.5% 0.5% 17.0% 15.9% 24,700 24,700 (96,200) (96,200) 0 0 $35.88

SOUTH PARK

A 2 1,144,200 4.9% 0.6% 5.4% 5.4% 14,200 14,200 (600) (600) 0 78,500 $36.72

B 7 1,850,500 18.3% 0.0% 18.3% 10.3% 18,400 18,400 (147,400) (147,400) 0 0 $30.72

C 2 266,400 8.1% 0.0% 8.1% 18.4% 7,200 7,200 27,300 27,300 0 0 $27.12

SUBTOTAL 11 3,261,100 12.7% 0.2% 12.9% 9.3% 39,800 39,800 (120,700) (120,700) 0 78,500 $31.32

GREATER DOWNTOWN

B 6 1,828,500 15.4% 1.3% 16.7% 17.1% 22,100 22,100 7,100 7,100 0 29,700 $29.28

C 8 592,300 22.2% 0.0% 22.2% 19.3% 8,400 8,400 (17,300) (17,300) 0 0 $24.00

SUBTOTAL 14 2,420,800 17.1% 1.0% 18.1% 17.6% 30,500 30,500 (10,200) (10,200) 0 29,700 $27.24

MARKET TOTAL

A 17 18,098,100 19.2% 0.3% 19.5% 19.2% 192,300 192,300 (53,000) (53,000) 0 478,500 $37.32

B 43 12,912,700 20.5% 0.3% 20.8% 20.0% 158,100 158,100 (104,800) (104,800) 0 29,700 $30.12

C 13 1,555,300 21.9% 0.4% 22.2% 23.6% 25,200 25,200 20,400 20,400 0 0 $23.64

TOTAL 73 32,566,100 19.8% 0.3% 20.1% 19.7% 375,600 375,600 (137,400) (137,400) 0 508,200 $34.56

OFFICE OVERVIEW

Downtown Los Angeles Office Market Q1 2014

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CONSTRUCTION

No new projects were delivered to the market in Q1; however there is currently 508,200 square feet of office space under construction. There is one project under construction in South Park as follows: the renovation of a 78,500 square feet Class A office building at 425 W 11th St in South Park. A 29,700 square-foot building in the Greater Downtown submarket has begun the renovation process to creative office.

The largest project under construction is the 400,000 square feet of Class A office space that is part of the Wilshire Grand Tower development.

The renovation projects are expected to start delivering in 2014, whilst the 400,000 square feet of Class A office space is expected to deliver in 2017.

ACTIVITY

New leasing activity during Q1 totaled 375,600 square feet compared to 121,500 square feet in Q4 2013, a substantial increase. The average quarterly leasing activity in 2013 was 301,000 square feet; therefore Q1 leasing activity is above that average.

The leasing highlights in Q1 were JAMS leasing 33,100 square feet at 555 W 5th St, The County of Los Angeles renewing and expanding for

30,900 square feet at 222 S Hill St, Blue Cross of California renewing for 25,000 at 801 S Figueroa St, LRG Management subleasing 21,900 square feet at 550 S Hope St, and Glumac Engineering leasing 17,700 square feet at 707 Wilshire Blvd.

RENTAL RATES

Average asking rents were highest in the Bunker Hill submarket ($35.88 PSF) and lowest in Greater Downtown submarket ($27.24 PSF).

Class A asking rents were $37.32 PSF compared to Class B at $30.12 PSF and Class C at $23.64 PSF.

The concentrated ownership in Downtown LA is expected to leverage their position to push rents for those tenants that desire to expand into more space. The contract rents in Downtown Los Angeles do still remain attractive relative to West Los Angeles, a circumstance that has not led to substantial tenant migration from West Los Angeles in the long run. The trend for asking rents in Downtown Los Angeles is expected to remain relatively flat for the remainder of 2014.

WEIGHTED AVERAGE ASKING LEASE RATES BY SUBMARKET

Downtown Los Angeles Office Market Q1 2014

LEASING ACTIVITY BY SUBMARKET

Downtown Los Angeles Office Market Q1 2014

>> The Downtown LA office market continues its negative absorption trend as it has reported negative absorption for the past four quarters

>> The absorption of the SEC provided a new tenant to the market, since the SEC relocated from the West Los Angeles market

>>The trend for asking rents in Downtown Los Angeles is expected to remain relatively flat for the remainder of 2014

$35.88

$33.84

$31.32

$27.24

$5

$10

$15

$20

$25

$30

$35

$40

$ PSF PER ANNUM (FSG)

24,700 30,500 39,800

280,600

50,000 100,000 150,000 200,000 250,000 300,000

SF

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RECENT TRANSACTIONS & MAJOR DEVELOPMENTS

Downtown Los Angeles Office Market Q1 2014

SALES ACTIVITY

PROPERTY ADDRESS SIZE SF SALE PRICE PRICE PSF BUYER SELLER

350 S Grand Ave, Los Angeles 1,415,500 SF $297,700,000 $210 PSF CIM Group CW Capital

LEASING ACTIVITY

PROPERTY ADDRESS LEASED SF LEASE TYPE BLDG TYPE LESSEE LESSOR

555 W 5th St, Los Angeles 33,100 SF New A JAMS Brookfield Office Properties

222 S Hill St, Los Angeles 30,900 SF Renewal/Expansion B County of Los Angeles CRJ LLC

777 S Figueroa St, Los Angeles 17,300 SF New A CoStar Brookfield Office Properties

555 W 5th St, Los Angeles 13,000 SF New A Bank Leumi Brookfield Office Properties

550 S Hope St, Los Angeles 12,800 SF New A Shangri-La Construction LBA Realty

MAJOR DEVELOPMENTS

PROJECT DEVELOPER SIZE SF SUBMARKET STATUS ESTIMATED COMPLETION

900 Wilshire Blvd, Los Angeles Hanjin International Corp 400,000 SF Financial District Under Construction Q1 2017

425 W 11th St, Los Angeles Lincoln Property Company 78,500 SF South Park Under Renovation Q3 2014

353 S Broadway, Los Angeles Flatiron Development Co LLC 29,700 SF Greater Downtown Under Renovation Q2 2014

7.0%

8.5% 8.7%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

UNITED STATES CALIFORNIA LOS ANGELES COUNTY

UNEMPLOYMENT RATE

United States, California & Los Angeles County February 2014

1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 4,000,000

4Q08 4Q09 4Q10 4Q11 4Q12

SF

0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000

1Q10 1Q11 1Q12 1Q13 1Q14

SF

HISTORICAL LEASING ACTIVITY

Downtown Los Angeles Office Market Q1 2010 - Q1 2014

OUTLOOK

The level of construction and investment currently occurring in Downtown LA has increased demand for space from stakeholders in the construction and investment activity. For example, the foreign companies that acquired land for mixed use development in the South Park market have signed leases for office space and the construction firm for the Wilshire Grand Project has also taken office space. The domino effect of the construction and investment activity in Downtown LA is expected to provide a much needed uptick in leasing activity in the near future.

MARKET DESCRIPTION

Downtown LA is a moderately large office market comprised of 32.5 million square feet, representing 11 percent of the total office space over 25,000 square feet in the LA Basin. Approximately 52 percent of the space in this market was built prior to 1980, and is considered relatively old by Southern California standards. Downtown Los Angeles is the most dense market in the region with only one percent of the space contained within low-rise buildings, while 24 percent and 75 percent of the space are in mid-rise and high-rise structures, respectively. Downtown includes a large concentration of firms from the legal, utilities, accounting and financial services sectors, and is home to many federal, state, and local government agencies as well.

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Total Rentable Square Feet:

Office space in buildings with 25,000 SF or more of speculative office space. Includes competitive space in Class A, B and C single- tenant and multi-tenant buildings. Excludes non-competitive owner-occupied buildings, buildings that include 30% or greater of medical or retail space, and space that is under- construction, under-renovation or off-market.

Class A Space:

Space that an image-conscious company would lease for its headquarters. Typically, this space has a very high level of finish and an excellent location, and commands the highest rents in the market.

Class B Space:

Highly functional, attractive space, but less prestigious than Class A Space, and commanding lower rental rates.

Class C Space:

Functional, competitive space, but with a lower level of finish and/or a less desirable location than with Class B Space, and commanding lower rental rates.

Low-Rise:

Buildings with a total of 4 floors or less.

Mid-Rise:

Buildings with a total of 5 to 13 floors.

High-Rise:

Buildings with 14 or more floors.

Direct Vacancy:

Space in existing buildings that is vacant and immediately available during the quarter for direct lease, plus space that is vacant but not available for direct lease or sublease (for example, that is being held for a future commitment).

Total Vacancy:

Space in existing buildings that is vacant and immediately available during the quarter for direct lease or for sublease, plus space that is vacant but not available for direct lease or sublease.

Net Absorption:

Net change in occupied square feet from one period to the next (includes the impact of change in vacant space available for sublease).

Leasing Activity:

Square feet leased from all known transactions completed during the quarter. Excludes lease renewals.

Weighted Average Asking Rental Rates:

Weighted by the total square feet available for direct lease. Data is based on Full Service Gross rents, and includes all costs associated with occupying the space, including taxes, insurance, maintenance, janitorial service and utilities.

Reported on a monthly, per SF basis.

Space Added (Net):

Total square feet added during the quarter via construction completions, including renovated space returned to market, less total square feet taken off-market due to demolitions or conversions.

Under Construction:

Includes buildings that are in some phase of construction, beginning with foundation work and ending with the issuance of a Certificate of Occupancy.

Technical Note

Colliers International is continuously refining its database.

The data shown in the historical tables and graphics in this report have been adjusted to take into account these changes in the database.

This report has been prepared by Colliers International for general information only. Information contained herein has been obtained from sources deemed reliable and no representation is made as to the accuracy thereof. Colliers International does not guarantee, warrant or represent that the information contained in this document is correct.

Any interested party should undertake their own inquiries as to the accuracy of the information. Colliers International excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and damages arising there from.

This report and other research materials may be found on our website at www.colliers.com/losangeles.

DEFINITIONS OF KEY TERMS USED IN THIS REPORT

482 offices in

62 countries on

6 continents

United States: 140 Canada: 42 Latin America: 20 Asia Pacific: 195 EMEA: 85

>> $2.0 billion in annual revenue

>> 1.12 billion square feet under

management

>> Over 13,500 professionals

Accelerating success.

ALGERMISSEN, STEPHEN Executive Vice President DWIGHT, TIM Associate KIRK, TERENCE Vice President MARADEI, GREG Vice President MIDZI, TINASHE Regional Analyst Research Services MUMPER, HANS Executive Managing Director PELLOW, NATHAN Senior Vice President PUTNAM, RICK Managing Director Western Region Capital Markets SCHNELL, RICHARD C.

Senior Vice President TARCZYNSKI, MARK Executive Vice President TISCHER, ADAM Vice President

TUSZYNSKI, GREG Vice President VILGIATE, NICO Executive Vice President WALKER, SHADD G.

Senior Vice President WOODS, RANDALL Vice President

UNITED STATES:

Downtown Los Angeles Office License No. 01908231

865 S. Figueroa Street, Suite 3500 Los Angeles, CA 90017

TEL +1 213 627 1214 FAX +1 213 327 3200

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