Q&A: Job Growth, Booming International Trade Strengthens Los Angeles Office Market

Steady job growth and growing international trade between the United States and the Pacific Rim are two major factors that have led to improving office fundamentals in Los Angeles, according to the recently released University of Southern California Lusk Center Casden Real Estate Economics Forecast. Delores Conway (pictured), director of the Casden Real Estate Economics Forecast, talked about the findings of the survey, and shared some thoughts on the Los Angeles office market with CPN Senior Editor Eugene Gilligan CPN: How would you characterize the Los Angeles office market today? Conway: We're seeing strong leasing and sales activity. For instance, rents increased 15 percent in West Los Angeles as of the third quarter of 2006, compared to the same period in 2005, and are now at $3.22 per square foot per month. Vacancy there is now at 7 percent in 2006, compared to 10 percent in the same period in 2005. The vacancy rate in Los Angeles County is now below 10 percent, the lowest level in 15 years. We have seen some office space being converted to residential properties. One sign of strength can be seen in 20000 Avenue of the Stars, a $275 million office building that was recently completed in Century City. Seventy percent of the space has already been leased. We've also seen Downtown office vacancy fall. As of the third quarter of 2006, it was 14.3 percent. The news there is that Maguire Properties announced they would build a large office building there, the first Downtown office project in 15 years. CPN: What were the key factors in the improved performance? Conway: We're seeing a lot of leasing activity from entertainment companies and professional business services companies. Overall, businesses are doing better, and are now making capital investments and hiring. So, office leasing has improved. CPN: What do you see on the horizon for 2007? Conway: I believe we're going to see continued rent increases for office space, and we should see that across Southern California. Rent increases should be particularly strong in West Los Angeles.