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Friday, Mar 29, 2024

West Valley Office Market Improves Slightly in 1Q

The West Valley office market helped the greater Valley absorb nearly 275,000 square feet during the first quarter — but so far job growth remains too weak to turn around the struggling sector. The overall movement is positive, but those numbers need to hold to signal a turn around, said Executive Vice President Dan Sanchez of Jones Lang LaSalle. “Four or five quarters in a row with 275,000 of absorption, I would get excited, but we haven’t seen that,” he said. The West Valley absorbed 108,093 square feet during the first quarter, driving vacancy down to 18.8 percent, compared to 19.8 percent a quarter earlier, according to Jones Lang LaSalle. Average asking rents fell 9 cents to $2.09 per month for Class A space. Most of that movement came from two deals. Farmers Insurance took an extra 27,000 square feet in an expansion at 6303 Owensmouth Ave. in Warner Center. And CBOL Corp., a contract manufacturer and consulting company, purchased a vacant office building totaling nearly 70,000 square feet in Chatsworth, Sanchez said. The large Woodland Hills office market is still struggling as its core drivers — health care and insurance — aren’t growing at pace where significant more space is needed, Sanchez said. The Central Valley remains the tightest, ending the quarter with a 13.3 percent vacancy rate, down from 14 percent in the fourth quarter of 2011. Overall, the Los Angeles North market, which Jones Lang defines as the San Fernando, Conejo and Santa Clarita valleys, saw vacancy at 17.5 percent compared to 17.8 percent in the previous quarter, according to Jones Lang LaSalle. Rents for Class A space fell to $2.20, an 8 cent drop from the previous quarter, although 9 cents higher than a year earlier. Those figures do not include Glendale and Burbank. Rents have dropped as landlords continue their aggressive push to lease vacant space and keep current tenants, Sanchez said, and tenants are taking advantage by staying put for the most part. When they do leave, he said, it is often a consolidation for efficiency. An improving local economy has helped the office market, although much higher gains are needed to help the sector recover, which heavily relies on job growth. “We are still not getting enough of it,” said Senior Vice President Jeff Albee of Colliers International. “But it has definitely improved.” Meanwhile, businesses now need less space. They are opting for open floor plans to drive down costs and boost creativity. Technology has also allowed more employees to work remotely. In March, Los Angeles County’s unemployment rate stood at 11.8 percent, unchanged from February’s revised rate and down from 12.2 percent a year earlier, according to the state’s Employment Development Department. Employers added 12,800 nonfarm jobs throughout the county in March. Unlike the West L.A. and Silicon Valley office market that are benefitting from a technology boom, the Valley doesn’t have a current driver, Sanchez said. “Until we see something that propels a recovery I think we are just going to be kind of stagnant,” he said. While job growth hasn’t been steady enough, tenants are becoming more willing to sign longer term leases as confidence in the economy has improved, Principal Scott Silverstein of Lee & Associates-LA North/Ventura Inc. said. In the Central Valley, Sherman Oaks and Encino have seen good activity as of late, he said. “We are actually seeing three to five-year and 10-year leases and that is a good sign,” Silverstein said. But Sanchez said many of those deals have termination clauses that will give tenants more flexibility if the economic recovery falters as it did last year.

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