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Market Information: LA/Orange County

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Economy:  Year-End 2009 

Basin Economy: Beginning to Stabilize

The LA Basin economy continues to experience weakness, but is beginning to show signs of stabilizing.  The LA Basin lost 266,300 payroll jobs over the 12 months ending October 2009 – a 4% drop, the same as the nation. In that period, Los Angeles employment fell by 151,000, Orange County shed 63,300 jobs and the Inland Empire lost 52,000 jobs.

The LA Basin unemployment rate rose to 12.5% in October 2009, from 7.8% a year ago. This compares to the national average of 10.2% in October and 10.0% in November.

Office Market:  Year-End 2009

Los Angeles: Contraction Slows, 2010 Looks Brighter

The Los Angeles County office market finished out the year with vacancy still rising and rents declining.  However, net absorption of office space was modestly positive in the final quarter – the first time in two years, helped by the delivery of pre-leased space – and the pipeline of new construction has dropped drastically.  With the economy beginning to recover, companies are easing up on job cuts and are returning less space to the market.  And with the reduction in new supply, the increase in vacancy is moderating.

Highlights:

• Net absorption of office space totaled positive 346,000 SF in LA County in the 4th quarter of 2009, after seven consecutive quarters of negative absorption.  For the year, net absorption was negative 6.4 million SF.
• Available sublease space decreased by 167,000 SF in LA County in the 4th quarter of 2009.  For the year, sublease space declined by 373,000 SF.  At 3.5 million SF, sublease space represents 1.0% of standing inventory.
• LA County’s overall vacancy rate increased to 12.1% at year-end 2009, from 11.9% in the 3rd quarter and 9.5% a year ago. The direct office vacancy rate rose to 11.1% in LA County at year-end 2009, from 10.8% in the 3rd quarter and 8.4% one year ago.
• There is 1.6 million SF of office space under construction or renovation in LA County at year-end 2009, compared to 3.4 million SF in the 3rd quarter and 6.9 million SF one year ago.  Projects currently under construction are 20% pre-leased, compared to 17% in the 3rd quarter and 32% one year ago.
• Office space deliveries totaled 1.5 million SF in LA County in the 4th quarter of 2009, at 60% leased upon delivery.  For the year, 3.9 million SF of office space was delivered in LA County, at 39% leased upon delivery.
• LA County office rents dropped 7.8% during 2009. Class A rents fell 9.3% during the year.  LA County asking rents for all space average $2.27/SF/month, full service.
• Office investment sales totaled $95.2 million in LA County in the 4th quarter of 2009 for properties with pricing information available.  For the year, sales totaled $647 million, compared to $3.1 billion in 2008.  Sales prices averaged $242/SF in LA County, down 25% from 2008 and on par with prices experienced in 2005.

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Orange County: Market Contraction Beginning to Slow

The Orange County office market continues to retrench, but the rate of contraction has slowed.  The amount of space that was returned to the market in the 4th quarter was down substantially from earlier in the year, and the increase in the vacancy rate moderated.  Nonetheless, rents continued to decline significantly through year-end.  Meanwhile, construction activity is negligible.

Highlights:

• Net absorption of office space in Orange County totaled negative 244,000 SF in the 4th quarter of 2009, compared to negative 1.1 million SF in the 3rd quarter and negative 800,000 SF in the first half of the year.  Net absorption totaled negative 2.2 million SF in all of 2009.
• Available sublease space declined by 85,000 SF in Orange County in the 4th quarter of 2009; for the year, sublease space declined by 178,000 SF.  At 1.1 million SF, sublease space represents 0.9% of standing inventory.
• Orange County’s overall office vacancy rate rose to 15.4% at year-end 2009, from 15.1% in the 3rd quarter and 13.5% a year ago.  The national average vacancy rate is 14.2%.  The direct office vacancy rate in Orange County rose to 14.5% at year-end 2009, from 14.1% in the 3rd quarter and 12.3% a year ago.
• There is 367,000 SF of office space under construction or renovation in Orange County at year-end 2009, compared to 405,000 SF in the 3rd quarter and 261,000 SF a year ago. The space under construction or renovation at year-end is 75% leased.
• Office space delivered in Orange County, including renovations, totaled 836,000 SF in the 4th quarter of 2009, at 77% leased upon delivery.  For all of 2009, deliveries totaled 1.7 million SF, at 77% leased upon delivery.
• Orange County office rents fell 10.7% in 2009, following a 6.3% decline in 2008. Class A rents dropped 11.6% during the year, compared to a 6.9% decline in 2008.
• Office investment sales totaled $290 million in Orange County in the 4th quarter of 2009 for properties with pricing information available.  For the year, sales totaled $790 million, about the same as in 2008. Office sales prices averaged $176/SF in Orange County in 2009, down 39% from 2008 and on par with sale prices of early 2004.

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Flex/R&D Market:  Year-End 2009

Market Contraction Continues

Businesses in Flex/R&D space continued to scale back operations in Los Angeles and Orange Counties as the year came to a close.

• Net absorption in 2009 (in SF):

• Available Flex/R&D sublease space in LA and Orange counties decreased to 663,500 SF at year-end 2009, down 30,800 SF from the 3rd quarter. Sublease space represents 0.6% of the standing inventory in LA and Orange counties.

To view and/or download the most recent snapshot report in an Adobe Acrobat file, click here.

To view and/or download a full sample report in an Adobe Acrobat file, click here.

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