Media & Tech Drive Demand for Office Space
The average asking rent in the Silicon Beach office market dropped in 1Q 2019 after a record-setting 2018. Asking rents declined 1.0% to $4.74 per square foot, down from the peak last quarter. Still, the average rent remains 1.5% above 2018 and is slightly down from the highest level on record. Over the previous quarter, the vacancy rate inched up 30 basis points – 10.5%. For the full report, click here.
Demand from tech and media companies drove significant leasing activity in the first quarter. Leasing volume increased 37.7% over 1Q 2018 to more than 1.2M square feet. Several companies leased large blocks of space during the quarter including Google, which took 584,000 share feet of the Westside Pavilion with plans to convert the former mall to a creative office campus called One Westside. HBO released 241,205 square feet at Ivy Station, a creative office building in Culver City scheduled to deliver in December 2019. Lastly, WeWork leased 112,000 square feet of creative office space at Lantana Campus in Santa Monica.
Looking ahead, Silicon Beach is expected to remain one of the hottest markets in Southern California. There was no construction added to the inventory this quarter. However, about 1.4M share feet of office space is expected to be completed within the next two years. Culver City, with more than half of the construction underway, is seeing a boom in demand for new space fueled by media and studio production companies.
In addition, there are more than 2.1M square feet of proposed construction projects in the pipeline. As the vacancy rate nears 10% or dips further along with rising rents, developers could gain the confidence to break ground on new projects.