The Los Angeles office market ended the year on a positive note as vacancies held steady while asking prices continued to rise, not least on the back of demand from the technology and entertainment sectors. The vacancy rate hit 13.2 percent, down just 10 basis points year-on-year and up 50 basis points month-on-month, data from CommercialEdge shows.
Office demand remained strong in 2021 given the uncertainty facing the sector in general. Tenant needs changed, from location to the physical layouts of floor plans. Construction activity in the subway bounced back to pre-pandemic averages as about 2.6 million square feet of office space was delivered in 2021.
Aside from space changes and relocations, media production drove demand in several hotspots of activity last year, along with technology and R&D.
One of the biggest leases of the year was signed in January. In El Segundo, California, Beyond meat agreed to occupy 281,110 square feet Hackman Capital Partners‘ 888 N. Douglas St., a 390,000-square-foot creative office building that was still under construction at the time. El Segundo recorded a vacancy rate of 24.0 percent in December, one of the highest on the Metro.
Boston properties expanded its tenant base last year by signing two streaming companies at its 1.2 million square foot Colorado Center in Santa Monica. In April, year agreed to occupy 72,000 square feet, and in June Hi signed a 33,000 square foot lease in the same building – the largest office lease of the year. The Santa Monica submarket maintained a relatively better position compared to other submarkets with a vacancy rate of 15.3 percent in December.
Submarkets where vacancies were equal to or better than Metro’s average included Burbank (at 6.7 percent in December), San Gabriel Valley (9.9 percent), West San Fernando Valley (11.0), Century City (11.2) and Central San Fernando Valley (13.2). The vacancy rate in the Los Angeles CBD was 15.4 percent.
Demand for Class A office space continued to drive up prices. The average full-service equivalent listing rate for December was $42.33, up 6.0 percent year-on-year and 10.1 percent above the national average ($38.44).
Among the other gateway cities, Los Angeles maintained a strong position, followed by Manhattan, which recorded a 12.8 percent vacancy rate in December. San Francisco was at 15.1 percent, while Chicago ended the year on a weak note with a vacancy rate of 18.8 percent.
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