LA’s Westside and Hollywood markets tighten and new supply appears to do little to mitigate insatiable demand
The direct vacancy rate for the combined Westside and Hollywood class A office market dipped to 8.9 percent at the end of 2019.
January 15, 2020
- The direct vacancy rate for the combined Westside and Hollywood class A office market dipped to 8.9 percent at the end of 2019. This marks the first time the vacancy rate has hit single digit territory since prior to the previous the economic crash. The key market driver continues to be the explosive growth of the media and entertainment industry. As the market tightens, both tenants and landlords are looking to the future for indications of continued pressure or signs of relief.
- The current combined pipeline of under construction and proposed projects for this subsection of the market is relatively robust when compared to the broader metro. An additional five million square feet of product is set to hit the market in the next three years. While this will attempt to relieve some of the need for additional space, a handful of large tenants have already staked their claim to approximately 40 percent of this development stock.
- In addition to preleasing, known future large tenant requirements, comprised primarily of 20 media and technology companies looking for additional space in the next three years, points to additional pressure on supply with vacancy hovering below ten percent through 2022.
- If the vacancy rate remains at a sustained compressed rate in this desirable market, future tenants will be forced to look for alternative options. While the redeveloped stock in the small pocket of West Adams has already garnered interest and captured some tenants who have been pushed or priced out of the Westside, other markets such as the Arts District in downtown and El Segundo to the south may be potential recipients of spill-over demand.
Source: JLL Research