LOS ANGELES SAN GABRIEL VALLEY OFFICE SECOND QUARTER 218 QUICK STATS Direct Vacancy 11.1% Overall Vacancy 11.4% Lease Rate FSG $2.32 Gross Absorption Under Construction MARKET TRENDS Current Quarter 345,68 SF SF Change from Last Quarter Year Overall Vacancy Rental Rates Gross Absorption Under Construction OFFICE SUMMARY & OUTLOOK The San Gabriel office market witnessed vacancy rates decrease from 12.6% to 11.4%, during the quarter. Average rents increased 4.5%, year over year, moving from $2.22 FSG to $2.32 FSG. Gross absorption finished with 346, square feet of activity for the quarter, while net absorption posted a gain of 14, square feet of occupied space. New construction activity was unchanged during the quarter, with no new projects currently underway. Unemployment rates have declined from 4.8% to 4.2%, year over year, and are equal to California (4.2%) and above the U.S. average of 4.%. The office market fundamentals still remain solid, as the market has recorded positive net absorption in four of the past five years, totaling 575, square feet of occupied space gains. Job creation remains the key to increased office demand. In June, non-farm employment grew by 1.5%, year over year, adding 66,4 new jobs, which should keep vacancy rates trending lower with manageable amounts of new construction. The investment and sale market for office buildings in Los Angeles County continues to see median prices rising through the first half of 218, up 6.3% for the year. Overall transaction volume peaked in 216 with a record $9.5 billion and continued to decline in 217 ($8.2 billion) and will most likely finish lower in 218. The capital markets remain solid with plenty of liquidity, but with the Fed expected to raise rates another 3-4 times in the coming year, we expect the current rate of price growth to slow considerably. We expect vacancy to remain near current levels in the coming quarters due to the delivery of new construction, and expect rents to increase 3% to 4% for most submarkets in the coming year. VACANCY & NET ABSORPTION ECONOMIC STATS Current Month Previous Year Jun. 18 Jun. 17 Unemployment 4.2% 4.8% Rate (MSA) Change in # +4,4 +66,4 Of Jobs (MSA) % Change for +.1% +1.5% Jobs (MSA) 3, 25, 2, 15, 1, 5, (5,) (1,) (15,) 18.% 16.% 14.% 12.% 1.% 8.% 6.% 4.% 2.% (2,) Net Absorption SF Overall Vacancy.%
LOS ANGELES SAN GABRIEL VALLEY OFFICE SECOND QUARTER 218 VACANCY RENTAL RATES & TIME ON THE MARKET 18.% 17.% 16.% 15.% 14.% 13.% 12.% 11.% 1.% 9.% 8.% $2.35 $2.3 $2.25 $2.2 $2.15 $2.1 $2.5 $2. $1.95 $1.9 $1.85 16. 14. 12. 1. 8. 6. 4. 2.. Direct Vacancy Overall Vacancy Avg. Rent (FSG) Time on Market (Months) Overall vacancy rates (including sublease space) decreased during the quarter, moving from 12.6% to 11.4%. Of the two submarkets within the San Gabriel market, the West San Gabriel ended the quarter with the lowest total vacancy of 5.6%, followed by the East San Gabriel at 14.8%. Since the second quarter of 217, overall vacancy rates have decreased from 13.1% to 11.4%, and is at its lowest level in more than a decade. Average asking rates increased 4.5%, year over year, moving from $2.22 FSG to $2.32 FSG. Of the two submarkets within the San Gabriel market, the West San Gabriel finished with an average asking rent of $2.44 FSG, followed by the East San Gabriel with an average asking rent of $2.29 FSG. Average asking rents increased 2.2% during the quarter, moving from $2.27 FSG to $2.32 FSG, while the median time to lease increased to 8.8 months during the quarter. ABSORPTION CONSTRUCTION ACTIVITY 5, 4, 3, 2, 18, 16, 14, 12, 2, 1, 1, 8, 6, 4, 2, (1,) (2,) Net Absorption SF Gross Absorption SF SF Newly Completed SF Under Construction Gross absorption totaled 346, square feet of activity, up 199% compared to the previous quarter, and higher by 14% compared to a year ago. Net absorption finished the quarter with a gain of 14, square feet of occupied space and has gained 121, square feet for the year. During 217, the market gained 17, square feet, after gaining 26, square feet during 216. The market finished with a gain of 35, square feet in 215, and a loss of 174, square feet in 214. We expect overall demand to remain near current levels during the second half of the year. Under construction activity was unchanged during the quarter, with no new projects currently underway, as the market has not delivered any new space since 215, when it added 168, square feet of new space. The market delivered 81, square feet in 214. The market did not deliver any new space during 213, after adding 157, square feet in 212. New construction completions have averaged approximately 5, square feet annually during the past five years. We expect new construction activity to remain limited in the coming quarters, with only a couple developments slated on the way.
LOS ANGELES SAN GABRIEL VALLEY OFFICE SECOND QUARTER 218 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 East San Gabriel 7,64,54 1,21,479 14.5% 1,48,869 14.8% West San Gabriel 4,218,89 229,3 5.4% 234,366 5.6% San Gabriel Totals 11,283,394 1,25,59 11.1% 1,283,235 11.4% Office Market Inventory West San Gabriel 37% East San Gabriel 63% 16.% 14.% 12.% 1.% 8.% 6.% 4.% 2.%.% Office Vacancy Rates East San Gabriel West San Gabriel Vacancy- Direct 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 218 Construction Current Quarter East San Gabriel $2.29 $1.35-$2.8 289,619 West San Gabriel $2.44 $1.5-$3.45 56,61 San Gabriel Totals $2.32 $1.35-$3.45 345,68 $2.55 $2.45 $2.35 $2.25 $2.15 $2.5 $1.95 $1.85 $1.75 East San Gabriel Office Rental Rates West San Gabriel San Gabriel Totals Average Asking Rent FSG 2 1,, 9, 8, 7, 6, 5, 4, 3, 2, 1, New Construction Activity East San Gabriel Square Feet Built in 218 West San Gabriel San Gabriel Totals Square Feet Under Construction
LOS ANGELES SAN GABRIEL VALLEY OFFICE SECOND QUARTER 218 SOUTHERN CALIFORNIA OFFICE BUILDING SALE TREND ANALYSIS TOTAL SALES TRANSACTIONS Market 29 21 211 212 213 214 215 216 217 218-2Q LA County 285 295 499 635 76 84 889 869 1,67 398 Orange County 76 113 165 246 291 263 335 37 313 149 Inland Empire 99 13 167 23 247 273 359 336 424 153 Ventura County 17 23 45 47 38 84 62 86 74 43 Totals 477 534 876 1,131 1,282 1,424 1,645 1,598 1,878 743 TOTAL TRANSACTION DOLLAR VALUE (MILLIONS) Bldg. SF 29 21 211 212 213 214 215 216 217 218-2Q LA County $732.9 $1,144.7 $2,33.8 $3,173.6 $5,922.8 $7,277.6 $4,756.5 $9,55.2 $8,158.8 $2,92.4 Orange County $354.9 $58. $61.3 $766.5 $1,362.8 $1,571.3 $2,746.3 $2,454.1 $2,226.1 $997.5 Inland Empire $65.9 $84.6 $118.8 $154.9 $221.1 $314.4 $624.6 $443. $447.5 $255.3 Ventura County $24. $76.8 $53.7 $4.7 $52.2 $235. $151.7 $161.4 $141.3 $166.8 Totals $1,177.8 $1,814. $2,816.6 $4,135.7 $7,558.9 $9,398.3 $8,279.2 $12,563.7 $1,973.6 $4,322. TOTAL SQUARE FEET SOLD Bldg. SF 29 21 211 212 213 214 215 216 217 218-2Q LA County 5,43,849 6,124,123 9,531,156 14,815,82 23,538,98 23,374,564 17,178,183 24,885,288 26,68,123 9,465,31 Orange County 1,953,5 3,435,122 3,798,459 5,98,2 7,193,35 7,993,896 11,973,523 11,599,768 8,854,731 4,96,141 Inland Empire 79,142 987,36 1,565,11 2,19,333 2,263,231 2,686,985 5,23,463 3,32,329 4,825,274 1,845,134 Ventura County 118,27 292,28 373,719 482,64 647,6 1,483,469 1,1,772 1,135,998 973,551 1,66,19 Totals 8,292,23 1,838,489 15,268,444 23,468,777 33,642,234 35,538,914 35,365,941 4,941,383 4,721,679 16,472,685 AVERAGE PRICE / SF Bldg. SF 29 21 211 212 213 214 215 216 217 218-2Q LA County $226.94 $233.86 $255.88 $262.81 $281.27 $344.75 $35.75 $427.39 $365.95 $356.34 Orange County $195.65 $181.45 $19.18 $21.67 $27.83 $27.89 $259.5 $263.26 $272.33 $26.79 Inland Empire $167.52 $12.22 $117.69 $133.98 $13.87 $142.51 $14.3 $168.56 $156.97 $185.11 Ventura County $231.8 $329.7 $179.26 $127.59 $99.7 $24.32 $182.5 $18.39 $188.33 $168.23 Averages $213.97 $29.48 $223.5 $234.72 $251.96 $292.82 $262.23 $353.4 $316.58 $31.23 MEDIAN PRICE / SQUARE FOOT Bldg. SF 29 21 211 212 213 214 215 216 217 218-2Q LA County $247.5 $25.42 $198.61 $228.42 $228.22 $259.47 $267.8 $284.84 $286.49 $34.6 Orange County $224.53 $186.47 $21.32 $182.57 $199.13 $214.74 $236.85 $274.32 $247.15 $278.6 Inland Empire $157.28 $134.72 $119.57 $111.1 $123.92 $124.33 $127.27 $151.6 $152.3 $158.51 Ventura County $297.9 $22.17 $215.19 $183.47 $175.15 $18.41 $213.19 $19.56 $22.82 $24.62 Median Average $234.2 $192.89 $191.59 $24.85 $213.96 $235.89 $235.8 $268.44 $26.3 $275.3 MEDIAN $ PSF INCREASE Bldg. SF 21 211 212 213 214 215 216 217 218-2Q LA County -17.% -3.3% 15.% -.1% 13.7% 3.2% 6.4%.6% 6.3% Orange County -17.% 8.% -9.3% 9.1% 7.8% 1.3% 15.8% -9.9% 12.7% Inland Empire -14.3% -11.2% -7.2% 11.6%.3% 2.4% 19.1%.5% 4.1% Ventura County -31.9% 6.4% -14.7% -4.5% 3.% 18.2% -1.6% 6.4%.9% Totals -17.6% -.7% 6.9% 4.4% 1.2% -.3% 14.2% -3.1% 5.9% 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 SAN GABRIEL VALLEY OFFICE SECOND QUARTER 218 SOUTHERN CALIFORNIA OFFICE BUILDING SALE TREND ANALYSIS Number of Transactions Transaction Volume $ 1,2 $12,. 1, $1,. 8 $8,. 6 $6,. 4 $4,. 2 $2,. 218-29 21 211 212 213 214 215 216 217 2Q LA County 285 295 499 635 76 84 889 869 1,67 398 Orange County 76 113 165 246 291 263 335 37 313 149 Inland Empire 99 13 167 23 247 273 359 336 424 153 Ventura County 17 23 45 47 38 84 62 86 74 43 Square Footage Sold $. 29 21 211 212 213 214 215 216 217 218-2Q LA County $732.9 $1,144.7 $2,33.8 $3,173.6 $5,922.8 $7,277.6 $4,756.5 $9,55.2 $8,158.8 $2,92.4 Orange County $354.9 $58. $61.3 $766.5 $1,362.8 $1,571.3 $2,746.3 $2,454.1 $2,226.1 $997.5 Inland Empire $65.9 $84.6 $118.8 $154.9 $221.1 $314.4 $624.6 $443. $447.5 $255.3 Ventura County $24. $76.8 $53.7 $4.7 $52.2 $235. $151.7 $161.4 $141.3 $166.8 Average Price PSF 3,, $45. $4. 25,, $35. 2,, $3. $25. 15,, $2. 1,, $15. 5,, $1. $5. 29 21 211 212 213 214 215 216 217 218-2Q 5,43,849 6,124,123 9,531,156 14,815,82 23,538,98 23,374,564 17,178,183 24,885,288 26,68,123 9,465,31 LA County Orange County 1,953,5 3,435,122 3,798,459 5,98,2 7,193,35 7,993,896 11,973,523 11,599,768 8,854,731 4,96,141 Inland Empire 79,142 987,36 1,565,11 2,19,333 2,263,231 2,686,985 5,23,463 3,32,329 4,825,274 1,845,134 Ventura County 118,27 292,28 373,719 482,64 647,6 1,483,469 1,1,772 1,135,998 973,551 1,66,19 Median Price PSF $. 29 21 211 212 213 214 215 216 217 218-2Q LA County $226.94 $233.86 $255.88 $262.81 $281.27 $344.75 $35.75 $427.39 $365.95 $356.34 Orange County $195.65 $181.45 $19.18 $21.67 $27.83 $27.89 $259.5 $263.26 $272.33 $26.79 Inland Empire $167.52 $12.22 $117.69 $133.98 $13.87 $142.51 $14.3 $168.56 $156.97 $185.11 Ventura County $231.8 $329.7 $179.26 $127.59 $99.7 $24.32 $182.5 $18.39 $188.33 $168.23 % Change Median Price PSF $325. $3. $275. 3.% 2.% $25. $225. $2. $175. $15. $125. $1. $75. $5. $25. $. 29 21 211 212 213 214 215 216 217 218-2Q LA County $247.5 $25.42 $198.61 $228.42 $228.22 $259.47 $267.8 $284.84 $286.49 $34.6 Orange County $224.53 $186.47 $21.32 $182.57 $199.13 $214.74 $236.85 $274.32 $247.15 $278.6 Inland Empire $157.28 $134.72 $119.57 $111.1 $123.92 $124.33 $127.27 $151.6 $152.3 $158.51 Ventura County $297.9 $22.17 $215.19 $183.47 $175.15 $18.41 $213.19 $19.56 $22.82 $24.62 1.%.% -1.% -2.% -3.% -4.% 21 211 212 213 214 215 216 217 218-2Q LA County -17.% -3.3% 15.% -.1% 13.7% 3.2% 6.4%.6% 6.3% Orange County -17.% 8.% -9.3% 9.1% 7.8% 1.3% 15.8% -9.9% 12.7% Inland Empire -14.3% -11.2% -7.2% 11.6%.3% 2.4% 19.1%.5% 4.1% Ventura County -31.9% 6.4% -14.7% -4.5% 3.% 18.2% -1.6% 6.4%.9%
LOS ANGELES SAN GABRIEL VALLEY OFFICE SECOND QUARTER 218 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 218 New buildings with original construction completed in the year 218 and granted a Certificate of Occupancy. Renovated buildings are not included.