Los Angeles Commercial Real Estate Market is on the Rise

March 4, 2015

The Los Angeles commercial real estate market is as diverse as its population, with a multi-layered and complex landscape driven by myriad economic factors. Sure studies and forecasts abound, but nothing beats decades of first hand experience combined with relevant market data. Macro meets micro in this week’s spotlight, where we drill down into what direction Los Angeles commercial real estate market is headed.


The greater Los Angeles industrial market has continued to improve, putting up a 2.98% vacancy rate in the fourth quarter of 2014. By comparison the vacancy rate for Q4 2013 was 4.11%. Lease rates have continued to increase while vacancy and availability of product have decreased. There was positive net absorption in the fourth quarter of 2014 for the sixth consecutive quarter. Development activity remains active with just over 2MM square feet under construction at the end of 2014. Most of that space is slated for build-to-suits which will not have an adverse effect on vacancy.


The LA retail market is experiencing a decrease in the amount of vacant and available space. Additionally, this segment has experienced positive net absorption over the last five quarters. The end of the fourth quarter posted a 4.68% vacancy rate, compared to a 5.06% vacancy rate during the same time period in 2013.  Development activity is on the rise with just over 1.76MM square feet of retail space under construction as of the fourth quarter of 2014.  The largest retail project currently being built in Los Angeles County is the Village at Westfield Topanga in Woodland Hills. The $350MM open air development in Warner Center will contain approximately 550,000 square feet. It is scheduled to open in the fall of 2015.


The Los Angeles office market has also experienced signs of improvement. Year end 2014 posted positive net absorption and the total vacancy rate slightly decreased to 16.6% from 17.1% as of Q3 2014. The West Los Angeles, Downtown Los Angeles and the San Gabriel Valley markets have heavily contributed to this positive trend. 1.79 MM square feet of office space is scheduled to be completed in 2015, most of which is from the renovation of existing buildings. Of this space, 45% is reportedly already leased.

by Dean Weinstock, Executive Vice President