FIRST QUARTER Downtown Los Angeles Office Market Report. Partnership. Performance.

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Partnership. Performance.

FIRST QUARTER 2015

Downtown Los Angeles

Office Market Report

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New Jersey

Market Snapshot

Downtown Los Angeles Begins 2015 With No Change In The Vacancy Rate

The Downtown Los Angeles office market began 2015 with a relatively flat performance as net absorption was positive 11,900 square feet (sf). The submarkets that contributed to positive demand for space in Q1 were the Financial District (+35,400 sf) and South Park (+6,400 sf). There were no large tenants that moved into the Downtown LA market from outside the market in Q1. A tenant that did relocate within the market was Ergobaby, from 888 S. Figueroa in South Park to 617 W. 7th in the Financial District.

New leasing activity in Q1 was 414,900 sf, led by the Bunker Hill submarket (192,400 sf). The majority of the new leasing activity in Bunker Hill is attributed to the City of Los Angeles lease for 126,000 sf at 350 S. Grand and the Nixon Peabody lease for 36,500 sf at 300 S. Grand. The other submarkets in Downtown LA recorded the following significant leases: Capital Group renewed for 323,000 sf at 333 S. Grand in Bunker Hill, USC expanded for 30,000 sf at 1150 S. Olive in South Park and Frandzel Robins Bloom & Csato signed a 24,300 sf lease at 1000 Wilshire in the Financial District.

No major move-ins or move-outs occurred in Q1, thus the total vacancy rate remained at 18.8%. The total vacancy rate for Class A buildings was 18.4%, the only building class to outperform the entire Downtown LA market. The spread between the vacancy rate in Class A buildings (18.4%) and Class B buildings (18.8%) continues to compress.

In Q1, the average asking rental rate in the entire Downtown LA office market was $3.04 per square foot (psf) on a full service gross basis (FSG). The buildings in the entire market that are classified as Class A had an asking rent of $3.21 FSG. The Financial District submarket had the highest asking rent for Class A buildings at $3.23 FSG and the South Park submarket had the lowest at $3.07 FSG.

The large sales transactions that closed in Q1 are as follows: Rising Realty Partners acquired 201-281 S. Figueroa St from US Bancorp for $84,000,600 ($311 psf), Urban Blox acquired 718 S. Hill St from Great Care Medical Group for $8,540,000 ($167 psf) and Pedro LLC acquired 200 S. San Pedro St from Taira Services for $9,000,000 ($195 psf). The unique aspect of the 201-281 S. Figueroa St transaction was that it was subject to a ground lease, which was reflected in its sale price.

The new leasing activity in Q4 2104 and Q1 2015 is expected to bring new tenants to the Downtown LA market. The vacancy level will be affected once these tenants occupy their new spaces. In 2014 the vacancy rate fell to 18.8% and in 2015 a slight decrease in the vacancy rate is expected.

Asking Rent

Vacancy Rates

I

Net Absorption

Partnership. Performance.

FIRST QUARTER 2015

Market Overview

Downtown Los Angeles Market Report

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First Quarter 2015 | Downtown Los Angeles Office Market Report

M A J O R L E A S E T R A N S A C T I O N S

SF Buyer

Rising Realty Partners

Price Seller

US Bancorp 270,200 718-720 S. Hill St, Los Angeles Great Care Medical Group

M A J O R S A L E T R A N S A C T I O N S

SF Completion Q2 2015 29,700 425 W. 11th St, Los Angeles Flatiron Development Co LLC 82,000 353 S. Broadway, Los Angeles

Developer

Korean Airlines

U N D E R C O N S T R U C T I O N / R E N O V A T I O N

In 2000, the population in Downtown Los Angeles was 27,800 and in 2014 the population reached 52,000. The residential population is expected to reach 90,000 in the next five years.

There are 82 office buildings in the Downtown Los Angeles market. Of these, 17 are considered to be Class A office buildings. The submarket with the highest percentage of Class A square footage relative to its inventory is Bunker Hill

The prior 12 months since Q1 2015 recorded volume of $1 billion in investment sales activity. The average price per square foot was $241. The largest office

development project in Downtown LA is the Wilshire Grand Center. It is expected to deliver 900 hotel rooms, 45,000 square feet of retail

space and 356,100 square feet of office space in 2017

Type SF

Renewal

Submarket

Bunker Hill

City of Los Angeles New Bunker Hill 126,000 Nixon Peabody New 300 S. Grand Ave, Los Angeles Bunker Hill 36,500 USC Expansion 1150 S. Olive St, Los Angeles South Park 30,000 Frandzel Robins New 1000 Wilshire Blvd, Los Angeles 24,300

Tenant

Capital Group

Address

333 S. Hope St, Los Angeles 350 S. Grand Ave, Los Angeles

323,000

$84,000,600

Address

201-281 S. Figueroa St, Los Angeles

Urban Blox

Address

900 Wilshire Blvd, Los Angeles

Q4 2015 Lincoln Property Company

Q3 2017 356,100

Financial District

PSF

$311

200 S. San Pedro St, Los Angeles Pedro LLC Taira Services Corp $9,000,000 46,100 $195 $167 51,100

$8,540,000

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First Quarter 2015 | Downtown Los Angeles Office Market Report

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213.935.7435

chris.cooper@avisonyoung.com

Avison Young at a Glance

Contact Information - United States

213.935.7430 323.851.6666

www.avisonyoung.com

310.899.1800 424.257.6474

Los Angeles - Downtown

555 S Flower St, Ste 3200 Los Angeles, CA 90071 Primary Contact: Ted Simpson ted.simpson@avisonyoung.com

Los Angeles - North

6711 Forest Lawn Dr Los Angeles, CA 90068 Primary Contact: Mark Evanoff mark.evanoff@avisonyoung.com

Los Angeles - West

10940 Wilshire Blvd, Ste 2100 Los Angeles, CA 90024

Primary Contact: Jonathan Larsen jonathan.larsen@avisonyoung.com

Los Angeles - Santa Monica

301 Arizona Ave, Ste 303 Santa Monica, CA 90401 Primary Contact: Randy Starr randy.starr@avisonyoung.com

San Diego - La Jolla

4225 Executive Sqr, Ste 600 La Jolla, CA 92037

Primary Contact: Jerry Keeney jerry.keeney@avisonyoung.com 858.201.7070

Orange County - Irvine

2030 Main Street, Ste 150 Irvine, CA 92614

Primary Contact: Dan Vittone dan.vittone@avisonyoung.com

949.757.1190 213.471.1050nash.midzi@avisonyoung.com

Report Prepared By:

Nash Midzi - Research Manager 555 S Flower St, Ste 3200 Los Angeles, CA 90071

Regional Managing Director:

Chris Cooper - Corporate 555 S Flower St, Ste 3200 Los Angeles, CA 90071

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