IRR-Los Angeles Mid-Year Viewpoint 2015 Local Market Report - Office
The Los Angeles office market continues to see a recovery that is characterized by generally improving market rents and decreasing vacancy rates. However, the recovery is not all positive, with some submarkets experiencing alternating quarters of short-term increases followed by unexpected declines. The key driver in the economic recovery is the creation of new jobs. The creation of new jobs leads to a lower unemployment rate and also creates an increased demand for office space. Los Angeles continues to be seen as a haven for the tech sector as high rents and a depleted talent pool have caused the technology industry to continue looking outside of the Silicon Valley area in Northern California.
The burgeoning local submarkets of Silicon Beach and Downtown Los Angeles both maintain a strong demand from this segment with creative office space and ample nearby amenities for tenants. Silicon Beach is the front runner for technology tenants with land available for large scale office campuses, close proximity to Los Angeles International Airport (LAX), and close proximity to the beach.
With the expected completion of a light rail line from Santa Monica to Downtown Los Angeles within the next year, Silicon Beach is expected to continue exhibiting its strength. Downtown Los Angeles is also expected to benefit from the light rail line as it transitions from a commuter area to a true 24-hour city due to a boom of multifamily development and conversion from older industrial buildings. Overall, the Los Angeles office market continues to recover on the heels of new job creation in the local markets, the strengthening employment base and added demand from the technology sector. The office market is projected to continue improving overall, although significant growth across all market segments will not occur without a continuation of additional jobs being created.