LOS ANGELES NORTH OFFICE FOURTH QUARTER 217 QUICK STATS Direct Vacancy 11.8% Overall Vacancy 12.5% Lease Rate FSG $2.75 Gross Absorption Under Construction MARKET TRENDS Current Quarter 1,6,941 SF 89,158 SF Change from Last Quarter Year Overall Vacancy Rental Rates Gross Absorption Under Construction OFFICE SUMMARY & OUTLOOK The L.A. North office market witnessed vacancy rates decrease during the quarter, moving from 12.6% to 12.5%. Average rents increased 3.8%, year over year, moving from $2.65 FSG to $2.75 FSG. Gross absorption totaled 1.1 million square feet of activity for the quarter, while net absorption finished in positive territory, gaining 31, square feet of occupied space. Under construction activity increased during the quarter, with 89, square feet currently underway, as the market did not deliver any new space in 217. Unemployment rates have declined from 4.7% to 4.2%, year over year, and is equal to California (4.2%) and above the U.S. average of 3.9%. The office market fundamentals remain solid, as the market has recorded positive net absorption in ten of the past eleven quarters, totaling 1.7 million square feet of occupied space gains. Job creation remains the key to increased office demand. In December, nonfarm employment grew by 1.2%, year over year, adding 54,7 new jobs, which should keep vacancy rates moving lower with a limited amount of new construction. The investment and sale market for office buildings in Los Angeles County continues to see strong activity levels as the total dollar sales volume in 216 was its strongest year ever with $9.6 billion, and followed that up with $8.1 billion in 217, its second highest total. Median sale prices finished down 1.4% on the year, but still remain near a 1-year high. The capital markets remain solid with plenty of liquidity, but we expect interest rates to rise further in the coming year. We expect vacancy levels to continue to trend lower in the coming quarters, with rents expected to increase 3% to 6% for most submarkets in the coming year. VACANCY & NET ABSORPTION ECONOMIC STATS Current Month Previous Year Dec. 17 Dec. 16 Unemployment 4.2% 4.7% Rate (MSA) Change in # +8,3 +54,7 Of Jobs (MSA) % Change for +.2% +1.2% Jobs (MSA) 4, 3, 2, 1, (1,) (2,) (3,) (4,) (5,) 19.% 17.% 15.% 13.% 11.% 9.% 7.% (6,) Net Absorption SF Overall Vacancy 5.%
LOS ANGELES NORTH OFFICE FOURTH QUARTER 217 VACANCY RENTAL RATES & TIME ON THE MARKET 17.% $2.8 16. 16.% 15.% $2.7 $2.6 14. 12. 1. 14.% $2.5 8. 13.% 12.% $2.4 $2.3 6. 4. 2. 11.% $2.2. Direct Vacancy Overall Vacancy Avg. Rent (FSG) Time to Lease (Months) Overall vacancy rates (including sublease space) decreased from 12.6% to 12.5%, during the quarter. Of the four submarkets within the LA-North market, the San Fernando submarket ended the quarter with the lowest total vacancy of 11.5%, followed by the at 12.7%, the Santa Clarita at 16.3%, and the submarket finishing the quarter at 24.7%. Since the fourth quarter of 216, overall vacancy rates have declined from 13.1% to 12.5%, and remains near its lowest level in more than a decade. Average asking rates increased 3.8%, year over year, moving from $2.65 FSG to $2.75 FSG. Of the four submarkets within the LA-North market, the submarket ended the quarter with the highest average asking rate of $3.4 FSG, followed by the San Fernando submarket at $2.5 FSG, the Santa Clarita at $2.48 FSG, and the finishing the quarter at $1.8 FSG. Average asking rents increased 1.1% during the quarter, moving from $2.72 FSG to $2.75 FSG. The median time to lease increased from 8. months to 9. months during the quarter. ABSORPTION CONSTRUCTION ACTIVITY 1,5, 45, 4, 1,, 35, 3, 5, 25, 2, 15, 1, (5,) 5, (1,,) Net Absorption SF Gross Absorption SF SF Newly Completed SF Under Construction During the quarter, gross absorption finished with 1.1 million square feet of activity, equal to the previous quarter, but lower by 12% compared to a year ago. Net absorption finished the quarter with a gain of 31, square feet of occupied space and gained 3, square feet for the year. In 216, the market gained 627, square feet, after gaining 76, square feet in 215. The market gained 46, square feet during 214, after losing 2, square feet during 213. Overall activity and demand levels remain solid, and we expect to see similar growth rates in 218. Under construction activity increased during the quarter, with 89,158 square feet currently underway, as the market did not deliver any new space in 217. In 216, the market added 26, square feet of new space, after delivering 38, square feet of new space during 215, 74, square feet in 214, and 41, square feet during 213. New construction completions have averaged approximately 135, square feet per year, during the past five years. New construction activity could begin to pick up in the coming quarters, if the market continues to see strong demand, declining vacancy and continued rent growth.
LOS ANGELES NORTH OFFICE FOURTH QUARTER 217 MARKET SNAPSHOT Total Direct Direct Total Total Inventory Vacant Vacancy Vacant w/ Sublet Vacant w/ Sublet SUBMARKETS Square Footage Square Footage Rate Square Footage Rate 893,435 22,416 24.7% 22,416 24.7% San Fernando 24,237,311 2,724,57 11.2% 2,798,813 11.5% Santa Clarita 2,542,79 399,223 15.7% 413,671 16.3% 29,251,185 3,36,236 11.5% 3,72,671 12.7% LA- North Totals 56,924,721 6,73,932 11.8% 7,135,571 12.5% Office Market Inventory 3.% Office Vacancy Rates 51% 2% Santa Clarita 4% San Fernando 43% 25.% 2.% 15.% 1.% 5.%.% Vacancy- Direct San Fernando Santa Clarita Vacancy w/ Sublease Rate Average Low-High Square Feet Square Feet Gross Absorption Asking Rent Asking Rent Built in Under Square Feet SUBMARKETS FSG Range FSG 217 Construction Current Quarter $1.8 $1.3-$1.95 16,61 San Fernando $2.5 $1.3-$4.7 89,158 486,96 Santa Clarita $2.48 $1.75-$3. 44,912 $3.4 $1.25-$5. 512,522 LA- North Totals $2.75 $1.25-$5. 89,158 1,6,941 Office Rental Rates New Construction Activity $3.5 $3. $2.5 $2. $1.5 $1. $.5 $. San Fernando Santa Clarita Average Asking Rent FSG 1, 9, 8, 7, 6, 5, 4, 3, 2, 1, San Fernando Square Feet Built in 217 Santa Clarita LA- North Totals Square Feet Under Construction
LOS ANGELES NORTH OFFICE FOURTH QUARTER 217 SOUTHERN CALIFORNIA OFFICE BUILDING SALE TREND ANALYSIS TOTAL SALES TRANSACTIONS Market 28 29 21 211 212 213 214 215 216 217 LA County 517 347 355 552 75 769 891 1,54 99 1,156 Orange County 247 13 151 25 294 347 334 425 392 41 Inland Empire 284 168 156 249 266 328 372 432 41 58 Ventura County 51 24 29 54 59 58 17 86 11 19 Totals 1,99 642 691 1,6 1,369 1,52 1,74 1,997 1,893 2,183 TOTAL TRANSACTION DOLLAR VALUE (MILLIONS) Bldg. SF 28 29 21 211 212 213 214 215 216 217 LA County $2,664.2 $753.7 $1,159.9 $2,72. $3,239.6 $5,953.1 $7,355.7 $4,843.9 $9,623.6 $8,57.2 Orange County $725.3 $364.9 $521.9 $625.9 $783.3 $1,385.1 $1,596.8 $2,797.9 $2,55.6 $2,273.2 Inland Empire $359.1 $85.7 $96. $13.2 $166.4 $237.5 $332.5 $642.6 $46.9 $554.2 Ventura County $93.9 $29.6 $81.3 $56.4 $43.2 $57.1 $246.9 $164.5 $169.4 $138.1 Totals $3,842.5 $1,233.9 $1,859.2 $2,884.6 $4,232.5 $7,632.8 $9,531.9 $8,448.9 $12,759.6 $11,22.6 TOTAL SQUARE FEET SOLD Bldg. SF 28 29 21 211 212 213 214 215 216 217 LA County 11,854,67 5,541,317 6,23,886 9,775,98 15,126,197 23,598,267 23,584,264 17,56,65 25,141,916 26,94,94 Orange County 3,283,136 2,23,473 3,59,352 3,865,353 6,76,432 7,31,297 8,173,268 12,235,143 11,838,955 9,14,83 Inland Empire 2,124,94 957,23 1,94,462 1,732,294 2,329,749 2,463,683 2,876,7 5,361,356 3,443,681 5,215,681 Ventura County 476,21 141,646 37,79 397,973 517,872 679,369 1,547,138 1,66,791 1,183,29 1,157,854 Totals 17,738,767 8,663,459 11,141,779 15,77,718 24,5,25 34,42,616 36,181,37 36,169,355 41,67,842 41,573,242 AVERAGE PRICE / SF Bldg. SF 28 29 21 211 212 213 214 215 216 217 LA County $273.87 $228.75 $235.36 $254.4 $264.17 $281.38 $344.77 $36.39 $429.23 $369.62 Orange County $293.51 $195.38 $182.39 $192.7 $211.65 $28.38 $27.78 $259.77 $264.8 $273.65 Inland Empire $212.76 $181.29 $13.41 $122.44 $135.29 $13.33 $144.25 $141.73 $17.69 $161.21 Ventura County $27.86 $248.34 $328.13 $182.62 $13.87 $14.6 $29.4 $189.67 $182.13 $189.78 Averages $268.41 $216.4 $21.92 $222.97 $235.55 $251.27 $292.9 $262.77 $353.81 $317.45 MEDIAN PRICE / SQUARE FOOT Bldg. SF 28 29 21 211 212 213 214 215 216 217 LA County $287.16 $26.95 $211.87 $24.94 $243.91 $233.31 $266.2 $283.91 $298.2 $293.7 Orange County $314.94 $224.41 $192.32 $216.15 $19. $24.49 $223.61 $246.57 $28.19 $259.2 Inland Empire $245.57 $187.29 $165.49 $135.16 $119.28 $125.7 $135.5 $132.88 $16.5 $169.4 Ventura County $253.62 $297.9 $22.17 $215.19 $183.47 $175.15 $18.41 $213.19 $19.56 $29.7 Median Average $286.42 $244.87 $2.89 $2.28 $216.91 $218.13 $242.37 $246.81 $278.51 $268.17 MEDIAN $ PSF INCREASE Bldg. SF 29 21 211 212 213 214 215 216 217 LA County -9.1% -18.8% -3.3% 19.% -4.3% 14.% 6.7% 5.% -1.4% Orange County -28.7% -14.3% 12.4% -12.1% 7.6% 9.4% 1.3% 13.6% -7.6% Inland Empire -23.7% -11.6% -18.3% -11.7% 4.9% 8.% -1.6% 2.8% 5.5% Ventura County 17.1% -31.9% 6.4% -14.7% -4.5% 3.% 18.2% -1.6% 1.% Totals -14.5% -18.% -.3% 8.3%.6% 11.1% 1.8% 12.8% -3.7% The following information has been obtained from sources deemed reliable. While we do not doubt its accuracy, we make no warranty or representation about it. This report contains verified arms-length transactions, but excludes all portfolio sales.
Median Price PSF Annual Increase Square Footage Sold Average Price PSF Number of Transactions Transaction $ Volume (Millions) LOS ANGELES NORTH OFFICE FOURTH QUARTER 217 SOUTHERN CALIFORNIA OFFICE BUILDING SALE TREND ANALYSIS Number of Transactions Transaction Volume $ 1,4 $12,. 1,2 $1,. 1, 8 6 $8,. $6,. 4 $4,. 2 $2,. 28 29 21 211 212 213 214 215 216 217 LA County 517 347 355 552 75 769 891 1,54 99 1,156 Orange County 247 13 151 25 294 347 334 425 392 41 Inland Empire 284 168 156 249 266 328 372 432 41 58 Ventura County 51 24 29 54 59 58 17 86 11 19 $. 28 29 21 211 212 213 214 215 216 217 LA County $2,664.2 $753.7 $1,159.9 $2,72. $3,239.6 $5,953.1 $7,355.7 $4,843.9 $9,623.6 $8,57.2 Orange County $725.3 $364.9 $521.9 $625.9 $783.3 $1,385.1 $1,596.8 $2,797.9 $2,55.6 $2,273.2 Inland Empire $359.1 $85.7 $96. $13.2 $166.4 $237.5 $332.5 $642.6 $46.9 $554.2 Ventura County $93.9 $29.6 $81.3 $56.4 $43.2 $57.1 $246.9 $164.5 $169.4 $138.1 Square Footage Sold Average Price PSF 3,, $5. $45. 25,, 2,, 15,, $4. $35. $3. $25. 1,, $2. $15. 5,, $1. $5. 28 29 21 211 212 213 214 215 216 217 11,854,67 5,541,317 6,23,886 9,775,98 15,126,197 23,598,267 23,584,264 17,56,65 25,141,916 26,94,94 LA County Orange County 3,283,136 2,23,473 3,59,352 3,865,353 6,76,432 7,31,297 8,173,268 12,235,143 11,838,955 9,14,83 Inland Empire 2,124,94 957,23 1,94,462 1,732,294 2,329,749 2,463,683 2,876,7 5,361,356 3,443,681 5,215,681 Ventura County 476,21 141,646 37,79 397,973 517,872 679,369 1,547,138 1,66,791 1,183,29 1,157,854 Median Price PSF $. 28 29 21 211 212 213 214 215 216 217 LA County $273.87 $228.75 $235.36 $254.4 $264.17 $281.38 $344.77 $36.39 $429.23 $369.62 Orange County $293.51 $195.38 $182.39 $192.7 $211.65 $28.38 $27.78 $259.77 $264.8 $273.65 Inland Empire $212.76 $181.29 $13.41 $122.44 $135.29 $13.33 $144.25 $141.73 $17.69 $161.21 Ventura County $27.86 $248.34 $328.13 $182.62 $13.87 $14.6 $29.4 $189.67 $182.13 $189.78 % Change Median Price PSF $35. $325. $3. $275. $25. $225. $2. $175. $15. $125. $1. $75. $5. $25. $. 28 29 21 211 212 213 214 215 216 217 LA County $287.16 $26.95 $211.87 $24.94 $243.91 $233.31 $266.2 $283.91 $298.2 $293.7 Orange County $314.94 $224.41 $192.32 $216.15 $19. $24.49 $223.61 $246.57 $28.19 $259.2 Inland Empire $245.57 $187.29 $165.49 $135.16 $119.28 $125.7 $135.5 $132.88 $16.5 $169.4 Ventura County $253.62 $297.9 $22.17 $215.19 $183.47 $175.15 $18.41 $213.19 $19.56 $29.7 3.% 2.% 1.%.% -1.% -2.% -3.% -4.% 29 21 211 212 213 214 215 216 217 LA County -9.1% -18.8% -3.3% 19.% -4.3% 14.% 6.7% 5.% -1.4% Orange County -28.7% -14.3% 12.4% -12.1% 7.6% 9.4% 1.3% 13.6% -7.6% Inland Empire -23.7% -11.6% -18.3% -11.7% 4.9% 8.% -1.6% 2.8% 5.5% Ventura County 17.1% -31.9% 6.4% -14.7% -4.5% 3.% 18.2% -1.6% 1.%
LOS ANGELES NORTH OFFICE FOURTH QUARTER 217 MARKET REPORT OVERVIEW SOUTHERN CALIFORNIA MARKET MAP METHODOLOGY & TERMINOLOGY Methodology Non-owner occupied, multi-tenant, office buildings that are 3, square feet and greater. Direct Vacant SF Space that is vacant and ready for occupancy by a user. The space is being offered for lease or sale directly from the landlord. Total Vacant W/ Sublet SF Space that is vacant and ready for occupancy by a user. The space is being offered for lease or sale by the landlord or for sublease by the current tenant. DAUM OFFICES LOS ANGELES, CALIFORNIA 81 S. Figueroa Street, Suite 6 Los Angeles, CA 917 213-626-911 LOS ANGELES NORTH, CALIFORNIA 2182 Burbank Boulevard, Suite 21 Woodland Hills, CA 91367 818-887-36 SANTA CLARITA VALLEY, CALIFORNIA 28494 Westinghouse Place, Suite 312 Valencia, CA 91355 661-75-2299 MID-COUNTIES, CALIFORNIA 1381 Cerritos Corporate Drive, Suite C Cerritos, CA 973 562-27-33 ORANGE COUNTY, CALIFORNIA 44 MacArthur Boulevard, Suite 95 Newport Beach, CA 9266 949-724-19 VENTURA & SANTA BARBARA, CALIFORNIA 751 Daily Drive, Suite 15 Camarillo, CA 931 85-987-8866 Direct Vacancy Rate Total vacant direct space (vacant space for lease or sale from the landlord or owner) divided by the total rentable square footage for existing buildings only. Vacancy W/ Sublet Rate Total vacant direct space and sublease space divided by the total rentable square footage for existing buildings only. Gross Absorption The total change in occupied space over a given period of time, counting space that is occupied but not space that is vacated by tenants. Gross absorption differs from leasing activity, which is the sum of all space leased over a certain period of time. SAN GABRIEL VALLEY, CALIFORNIA 13181 Crossroads Pkwy. N, Suite 1 City of Industry, CA 91746 562-695-7244 SOUTH BAY, CALIFORNIA 125 W. 19th Street, Suite 42 Gardena, CA 9248 31-538-67 INLAND EMPIRE, CALIFORNIA 3595 E. Inland Empire Boulevard, Bldg. 5 Ontario, CA 91764 99-98-1234 PHOENIX ARIZONA 172 E. Highland Avenue, Suite 12 Phoenix, AZ 8516 62-957-73 The information contained in this report has been obtained from sources deemed reliable and has incorporated fourth-party data which has not been independently verified by DAUM. While we do not doubt its accuracy, DAUM makes no guarantee or warranty as to its completeness or accuracy. Due to the dynamic (constantly changing) database which DAUM uses to compile and analyze markets contained in this report, previously published statistics may vary from the data published in this report. Statistics and data have been revised to reflect changes in the following categories: existing buildings being verified and added to the database, new or revised occupancy information gathered, new construction being added to the inventory, building demolitions and renovations, as well as other factors that would necessitate revisions to the data and the properties surveyed. This methodology allows us to present the most current and up-to-date information, trend analysis and comparative statistics for this report. Net Absorption The net change in occupied space over a given period of time, calculated by summing all the positive changes in occupancy (move ins) and subtracting all the negative changes in occupancy (move outs). Under Construction Planned buildings for which construction has started but have not yet been granted a Certificate of Occupancy. Planned buildings are not included. Completed in 217 New buildings with original construction completed in the year 217 and granted a Certificate of Occupancy. Renovated buildings are not included.