office Greater LOS ANGELES basin market report Rising Rents and Positive Absorption Lead to Tightening Market Conditions EXECUTIVE SUMMARY MARKET indicators - VACANCY 15.7% NET ABSORPTION +487,5 CONSTRUCTION 4,571,42 RENTAL RATE $2.51 P UNEMPLOYMENT 6.9% In first quarter 215, the Greater Los Angeles Basin office market recorded positive net absorption of 487,5 square feet (). The total vacancy rate decreased to 15.7% from 15.9% last quarter. Weighted average asking rental rates increased to $2.51 per square foot (P), per month Full Service Gross (FSG). Leasing activity recorded at 4,365,722. There is currently 4,571,42 of office space currently under construction/ renovation, the majority of which is in LA County. LOS ANGELES COUNTY SUMMARY February 215 figures for nonfarm employment in Los Angeles County showed a recovering job market. Over the past 12 months, Los Angeles County has gained 11,1 jobs for an increase of 2.4%. This gain in employment led to the unemployment lowering to 7.8% compared to 8.7% one year ago. In first quarter 215, the Los Angeles office market remained relatively flat, experiencing -14,1 of absoprtion, while the vacancy remained unchanged at 16.5%. Weighted average asking rental rates increased to $2.71 P FSG. BASIN WIDE MARKET trends - >> Total vacancy rate decreases to 15.7% >> Weighted average asking rental rate increases to $2.51 P >> Leasing activity at 6,41,12 >> There was positive absorption of 487,5 $ P PER MONTH (WEIGHTED) HISTORICAL VACANCY VS RENTS Q1 211 - RENTS VACANCY $2.55 $2.5 $2.45 $2.4 $2.35 $2.3 $2.25 $2.2 25.% 2.% 15.% 1.% 5.% HISTORICAL net absorption & Construction COMPLETIONS - Q1 211-2,5, 2,, 1,5, 1,, 5, NET ABSORPTION CONSTRUCTION COMPLETIONS >> Construction activity at 4,571,42 $2.15 $2.1 1Q11 1Q12 1Q13 1Q14 1Q15.% (5,) (1,,) 1Q11 1Q12 1Q13 1Q14 1Q15 1 Colliers International continuously refines its database. As a result, data reflected in this report may not be consistent with data reported in previous quarters. www.colliers.com/losangeles
market Report OFFICE greater LOS ANGELES basin VENTURA Simi Valley Thousand Oaks Oxnard N 5 11 45 1 Santa Monica Lancaster Palmdale LOS ANGELES COUNTY Burbank los angeles BASIN DEMOGRAPHICS >> Population: 18,577,818 (215 Estimate) 19,348,242 (22 Projection) 4.15% (Growth 215-22) >> Household income: $8,493 (Average) $57,862 (Median) >> Job growth: 3.6% (past 12 months) Wrightwood >> Unemployment rate: 6.9% (as of February 215) 5 395 Pomona 1 1 Whittier 15 Los Angeles Riv 5 Anaheim 45 Santa Ana Long Beach ORANGE 1 COUNTY Newport Beach Mission Viejo Laguna Beach Dana Point The Central Los Angeles office market started 215 on a positive note as the total vacancy rate decreased 2 basis points to 19.1% and direct weighted average asking rents increased to 1.92 P FSG. There is approximately 1.24 million of office space currently under construction in the Central LA market, which is approximately 3% of all new construction in Los Angeles County. DOWNTOWN los angeles The Downtown Los Angeles market started the year on a postive note as leasing activity totaled 871,676, a 52% increase from last quarter s 572,692. Leasing highlights included Capital Group renewing 323, for 15 years at 333 S. Hope St., Nixon Peabody signing for 36,55 at 3 S. Grand Ave. and Frandzel Robins LLP leasing 24,258 at 1 Wilshire Blvd. The total overall vacancy rate increased to 18.8% from 18.6% in the previous quarter. Rental rates continued to climb, recording at $36.85 P. This marks the 9th consecutive quarter of rental rate increases for the market. west los angeles The West Los Angeles office market recorded positive absorption of 84,9 in the first quarter of 215. Total vacancy decreased 2 basis points to 12.9%, and direct weighted average gross asking rents jumped to $3.76 P FSG. Investment sales activity in the first quarter reamained robust as Invesco Real Estate acquired The Reserve at 1331 W. Jefferson Blvd in Playa Vista for $791 P from Shorenstein Properties, IDS Real Estate Group acquired the three building Beats by Dre portfolio in Culver City totaling 127,447 for $847 P from Hackman Capital Partners, and Tishman Speyer acquired 52 Broadway in Santa Monica for $85 P from Vornado Realty Trust. sfv & Ventura County The San Fernando Valley and Ventura County office market saw total vacancy decrease for the eigth consecutive quarter to 15.6%. Net absorption in first quarter 215 was 91,6, bringing the vacancy rate down by 1 basis points. Direct weighted average asking rents decreased to $2.18 P FSG. New leasing activity in the first quarter was 628,53 compared to 543,8 in fourth quarter 214. VACANCY BY market NET ABSORPTION BY MARKET % VACANT 26% 24% 22% 2% 18% 16% 14% 12% 1% 8% 6% 4% 2% %.4% 15.1% 15.2% 15.9% SUBLEASE VACANCY DIRECT VACANCY.3%.1%.2%.5%.8%.1% 22.5%.7%.% 18.6% 12.2% 13.2% 12.1% 18.9% V & VENTURA CO. 4, 3, 2, 1, (1,) (2,) (3,) (4,) (5,) (6,) 295,3 26,3 229,6 91,6 84,9 64,8 24,3 (44,7) (464,6) V & VENTURA CO p. 2 Colliers International
market Report OFFICE greater LOS ANGELES basin OFFICE OVERVIEW EXISTING PROPERTIES VACANCY ACTIVITY ABSORPTION CONSTRUCTION RENTS Submarket/ Class Bldgs Total Inventory Direct Sublease Total Total Prior Qtr Leasing Activity Current Qtr Leasing Activity YTD Net Absorption Current Qtr Net Absorption YTD Completions Current Qtr Under Construction Weighted Avg Asking Lease Rate A 856 159,819,31 14.3%.5% 14.9% 16.2% 3,927,719 3,942,97 579,1 579,1 13,114 3,471,337 $3.1 B 1,829 123,468,15 16.3%.3% 16.6% 18.6% 2,245,257 2,232,235 (78,2) (78,2) 1,1,83 $2.1 C 45 18,221,54 16.8%.1% 16.9% 17.1% 2,643 2,643 5, 5, $1.53 Subtotal 16 13,384,347 18.9%.1% 19.1% 19.3% 111,48 111,48 24,3 24,3 1,242,6 $1.92 Subtotal 72 32,258,544 18.6%.2% 18.8% 18.6% 871,676 871,676-44,7 (44,7) 771,892 $3.7 Subtotal 422 56,22,441 12.2%.7% 12.9% 13.1% 1,267,543 1,267,543 84,9 84,9 549,665 $3.76 Subtotal 193 23,198,643 15.2%.8% 16.% 16.9% 875,615 875,615 229,6 229,6 1,39,265 $2.72 SAN FERNANDO VALLEY & VENTURA COUNTY Subtotal 422 33,616,614 15.1%.5% 15.6% 15.7% 628,53 628,53 91,6 91,6 13,114 6,466 $2.18 Subtotal 273 3,289,498 22.5%.3% 22.8% 21.3% 463,94 463,94 (464,6) (464,6) 482,488 $2.18 Subtotal 157 1,174,8 12.1%.% 12.1% 12.7% 147,37 147,37 64,8 64,8 $2.3 LOS ANGELES SUBTOTAL Subtotal 1,645 199,142,887 16.1%.4% 16.5% 16.5% 4,365,722 4,365,722 (14,1) (14,1) 13,114 4,146,376 $2.72 Subtotal 1,22 81,94,945 13.2%.4% 13.6% 14.1% 1,827,33 1,827,33 295,3 295,3 425,44 $2.15 Subtotal 423 2,391,272 15.9%.1% 16.% 17.% 217,347 217,347 26,3 26,3 $1.67 GREATER LOS ANGELES BASIN MARKET TOTAL Total 3,9 31,475,14 15.3%.4% 15.7% 15.9% 6,41,12 6,41,12 487,5 487,5 13,114 4,571,42 $2.51 Colliers International p. 3
market Report OFFICE greater LOS ANGELES basin >> The West Los Angeles market continues its trend of positive absorption with +84,9 for the quarter >> Construction activity remains strong at 4,571,42 >> The direct weighted average asking rental rate increased to $2.51, rents have been rising for the past 11 quarters. south bay The South Bay office market saw total vacancy increase during the first quarter of 215 by 14 basis points to 21.9% from 2.5% last quarter. Direct weighted average asking rents increased to $2.16 P FSG from $2.9 P FSG last quarter. Demand for space was negative with -461,9 of net absorption due to the conversion of owner/user properties to investment offerings. Rising rents, leasing activity and construction demonstrate strong market fundamentals despite the negative absorption. san gabriel valley The total vacancy rate for the San Gabriel Valley office market decreased for the 5th consecutive quarter by 6 basis points to 12.1%. Absorption was positive 64,8 square feet (), marking the 4th straight quarter of positive absorption over the same time period. Among the move-ins that contributed to overall absorption was Med- Legal moving into 2,546 at 955 Overland Ct. in San Dimas. TRI Cities The Tri-Cities office market recorded 165, of positive absoprtion for first quarter 215. The total vacancy rate decreased to 16.% from 16.9% one quarter ago. Direct weighted average asking rents increased to $2.72 P FSG compared to $2.66 P FSG last quarter. New leasing activity was 875,615 in first quarter, of which a majority was the sale leaseback of the Dreamworks Campus. This also doubled as biggest sale deal of the quarter, with SunTrust Equity Funding picking up the property, consisting of 396,544 over 5 buildings, for $185M ($467 P) from the struggling studio. orange county The Orange County office market continued a positive stride into the start of the year. In first quarter 215, total vacancy decreased 5 basis points to 13.6% from the previous quarter s rate of 14.1%. Total net absorption remained positive for the fourth consecutive quarter recording at 295,3. As market conditions continue to improve and vacancy rates decline, overall direct weighted average asking rental rates increased to $2.14 P FSG from the previous quarter s rate of $2.8 P FSG. WEIGHTED AVERAGE ASKING LEASE RATES BY MARKET LEASING ACTIVITY BY MARKET $3.76 $ P PER MONTH (FSG) $3.5 $3. $2.5 $2. $1.67 $1.92 $2.15 $2.18 $2.3 $2.16 $2.63 $3.7 2,, 1,8, 1,6, 1,4, 1,2, 1,, 871,676 875,615 1,267,543 1,827,33 $1.5 8, 628,53 $1. V & VENTURA COUNTY 6, 4, 2, 147,37 463,94 217,347 111,48 INLAND EMPRIRE CENTRAL LOS ANGELES DOWNTOWN LOS ANGELES V & VENTURA CO. p. 4 Colliers International
market Report OFFICE greater LOS ANGELES basin inland empire In, the total vacancy rate for the Inland Empire office market decreased 1 basis points from 17.% last quarter to 16.%. This is down 3 basis points from vacancy rates reported a year ago. Net absorption for the first quarter was 26,3 compared to 333,9 in fourth quarter 214. This quarter there was 217,357 leased compared to 172,26 in fourth quarater 214. market description The Los Angeles Basin office market is comprised of 31.5 million of multi-tenant office space in buildings 25, or larger. It ranks as the third largest office market in the nation, following New York City and the Greater Washington DC area. Most of its space, 55 percent, was built in or after 1985, making it a relatively young market. It is also relatively decentralized, with only 11% of the space located within Downtown Los Angeles and 89% dispersed throughout the region. 4% of the space is in low-rise buildings, followed by 31% in mid-rise buildings and 29% in highrise structures. HISTORICAL LEASING ACTIVITY Q1 211 - UNEMPLOYMENT RATE United States, California & Los Angeles Basin February 215 7,, 8.% 7.% 7.1% 6.9% 6,, 6.% 5.5% 5,, 5.% 4,, 4.% 3,, 3.% 2,, 2.% 1,, 1Q11 1Q12 1Q13 1Q14 1Q15 1.%.% United States California Los Angeles Basin RECENT TRANSACTIONS & MAJOR DEVELOPMENTS SALES ACTIVITY PROPERTY ADDRESS SIZE SALE PRICE PRICE P BUYER SELLER 1331 W. Jefferson Blvd., Los Angeles 338,695 $316,, $791 P Invesco Real Estate Shorenstein Properties, LLC 1 Flower St, Glendale 396,544 $185,, $467 P SunTrust Equity Funding LLC DreamWorks Animation SKG, Inc. 4 MacArthur Blvd, Newport Beach 375, $132,, $352 P Hines/Oaktree Capital Management, L.P. Emmes Group 86 Hayden Pl./855 Higuera St., Culver City 127,447 $18,, $847 P IDS Real Estate Group Hackman Capital Partners 52 Broadway, Santa Monica 112,985 $91,, $85 P Tishman Speyer Vornado Realty Trust LEASING ACTIVITY PROPERTY ADDRESS LEASED LEASE TYPE BLDG TYPE LESSEE LESSOR 1 Flower St, Glendale 392,734 Prev Occ A Dreamworks Animation SunTrust Equity Funding LLC 333 S Hope St, Los Angeles 323, Renewal A Capital Group Brookfield Office Properties 4 MacArthur Blvd, Newport Beach 177,12 Direct A Hyundai Capital America Hines/Oaktree Capital Management 16 S Douglass Rd, Anaheim 127,75 Direct B Carrington Mortgage Services Mept Area Corp Center LLC 35 S Grand Ave, Los Angeles 126, New A City of Los Angeles CIM Group MAJOR DEVELOPMENTS PROJECT DEVELOPER SIZE MARKET STATUS ESTIMATED COMPLETION Columbia Square (5 bldgs) Kilroy Realty 46114 Hollywood Under Construction Q2-Q4 215 2 Spectrum Center The Irvine Company 456 South Under Construction Q1 216 Icon at Sunset Bronson Studios (2 bldgs) J.H. Snyder Company 45 Hollywood Under Construction Q4 216 Colliers International p. 5
market Report OFFICE greater LOS ANGELES basin DEFINITIONS OF KEY TERMS USED IN THIS REPORT Total Rentable Square Feet: Office space in buildings with 25, or more of speculative office space. Includes competitive space in Class A, B and C singletenant and multi-tenant buildings. Excludes non-competitive owner-occupied buildings, buildings that include 3% or greater of medical or retail space, and space that is underconstruction, under-renovation or off-market. Net Absorption: Net change in occupied square feet from one period to the next (includes the impact of change in vacant space available for sublease). Leasing Activity: Square feet leased from all known transactions completed during the quarter. Excludes lease renewals. 52 offices in 67 countries on 6 continents United States: 14 Canada: 31 Latin America: 24 Asia Pacific: 199 EMEA: 18 >> $2.3 billion in annual revenue >> 1.7 billion square feet under management >> Over 16,2 professionals Class A Space: Space that an image-conscious company would lease for its headquarters. Typically, this space has a very high level of finish and an excellent location, and commands the highest rents in the market. Class B Space: Highly functional, attractive space, but less prestigious than Class A Space, and commanding lower rental rates. Class C Space: Functional, competitive space, but with a lower level of finish and/or a less desirable location than with Class B Space, and commanding lower rental rates. Low-Rise: Buildings with a total of 4 floors or less. Weighted Average Asking Rental Rates: Weighted by the total square feet available for direct lease. Data is based on Full Service Gross rents, and includes all costs associated with occupying the space, including taxes, insurance, maintenance, janitorial service and utilities. Reported on a monthly, per basis. Space Added (Net): Total square feet added during the quarter via construction completions, including renovated space returned to market, less total square feet taken off-market due to demolitions or conversions. Under Construction: Includes buildings that are in some phase of construction, beginning with foundation work and ending with the issuance of a Certificate of Occupancy. united states: Los Angeles Headquarters Office License No. 198231 865 S. Figueroa Street, Suite 35 Los Angeles, CA 917 tel +1 213 627 1214 FAX +1 213 327 32 PUPIL, MARTIN President, West Region HOLLINGSWORTH, JOHN Executive Managing Director MUMPER, HANS Executive Managing Director Mid-Rise: Buildings with a total of 5 to 13 floors. High-Rise: Buildings with 14 or more floors. Technical Note Colliers International is continuously refining its database. The data shown in the historical tables and graphics in this report have been adjusted to take into account these changes in the database. Direct : Space in existing buildings that is vacant and immediately available during the quarter for direct lease, plus space that is vacant but not available for direct lease or sublease (for example, that is being held for a future commitment). Total : Space in existing buildings that is vacant and immediately available during the quarter for direct lease or for sublease, plus space that is vacant but not available for direct lease or sublease. This report has been prepared by Colliers International for general information only. Information contained herein has been obtained from sources deemed reliable and no representation is made as to the accuracy thereof. Colliers International does not guarantee, warrant or represent that the information contained in this document is correct. Any interested party should undertake their own inquiries as to the accuracy of the information. Colliers International excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and damages arising there from. This report and other research materials may be found on our website at www.colliers.com/losangeles. Accelerating success. p. 6 Colliers International www.colliers.com/marketname