Century City is Office Frontrunner in Los Angeles
There haven't been too many bright spots in the office sector in Los Angeles this year.
The overall malaise continued in Q2 2024, with office leasing activity totaling 2.7M SF, a drop of 18% from the first quarter total of 3.2M in the first quarter, according to the latest market report from Savills.
The availability rate ticked down by slightly by 20 bps to 27.4%, which is still 120 bps higher than office availability in L.A. a year ago. The average asking rental rate also ticked down, to $3.90 per SF per month, from $3.94 the previous quarter.
Due to softer market fundamentals and high interest rates, the outlook for offices in Los Angeles for the second half of this year also is not very bright.
"More office landlords are projected to default on their loans, as well as to give their properties back to their lenders in deeds in lieu of foreclosure between now and year-end," Savills said.
However, the report noted, L.A.'s office market remains "bifurcated," with one submarket in particular-Century City-notching robust leasing activity and historically high asking and effective rental rates.
Universal Music Group's 226K SF renewal at 2220 Colorado Avenue in Santa Monica topped Savills' chart of the 10 largest leases inked in Los Angeles in the second quarter. The rest of the top-10 list was dominated by Century City, which accounted for four of the entries.
All of Century City lease renewals on the list involved legal services firms, and three of them were expansions: Lathan & Watkins inked a deal for about 98,761 SF at 10250 Constellation Boulevard; Paul Hastings expanded to 66,183 SF at 1999 Avenue of the Stars; and Paul Weiss expanded to 49,404 SF at 2029 Century Park East. Sheppard Mullin renewed its lease for 76,374 SF at 1901 Avenue of the Stars.
The 10M SF Century City submarket topped the rental rate chart in Los Angeles with an asking rental rate of $6.82 per SF per month.
According to a report in the Los Angeles Times, rents have increased steadily over the past several years in the Century City submarket, where large tenants typically sign long-term leases.
Landlords have been reinvesting in their properties to add amenities and by offering strong tenant concession packages, the report said. The submarket is home to numerous trophy buildings, including several on the aptly named Constellation Boulevard and Avenue of the Stars.
JMB Realty's 37-story, 730K SF office tower is rising on the northeast corner of Avenue of the Stars and Constellation Boulevard in Century City.
The $300M tower, located at 1950 Avenue of the Stars and scheduled to be delivered in 2026, is almost fully preleased. Creative Artists Agency, the largest talent firm in L.A., has inked a 400K SF deal to anchor the tower with its headquarters.
Source: GlobeSt/ALM