Rents on the Westside are climbing. Landlords and their brokers have declared good times, yet both CBRE and Newmark report vacancies at 12.7%for the Westside and 15% for Los Angeles at the end of the first quarter. Ten percent used to demarcate a landlord from tenant market. Only once vacancies dipped below 10%–landlords declared good times. The Westside’s occupancy has increased now for 4 straight years. After the dot com bust in the early 2000’s, with only three years of rising occupancy, the Westside hit a peak of 93.6% occupancy and a low of a 6.4% vacancy. San Francisco has a vacancy rate of 5% at the end of the first quarter 2015. In the 90’s, Westside office vacancies dipped to 7%. Only in the 1980s did vacancy not break below the magic 10% due to massive new construction.
So why are we so bullish with vacancies still over 10% The answer may involve the distribution of vacancies. Some areas of much hotter than areas. For examples, rents in West Los Angeles are still under or near $3 per square foot while rents in Santa Monica are over $4 per square foot. Creative office is now much hotter than conventional offices. Industry Partners reports the vacancy for creative office at only 8.4% Large blocks of space are much harder to come by than small spaces. Offices with 4 per 1000 parking are much more dear than those with only 2 per 1000 parking in today’s world of 5 employees per 1000 square feet. . As with the rest of the economy, this expansion is not shared equally.