Office Rents Rising, But Multifamily Dominates Development In OC And LA
The multifamily and office markets appear to be healthy in both LA and the OC, though the two markets have their differences and OC is lagging about a year behind its larger neighbor.
Parker Properties managing member Russ Parker (second from left) said the OC market "seems to be at least a year behind LA."
LA "is starting to experience anemia" even as Orange County starts to take off, he said at our recent Orange County 2017 Forecast event.
The OC is just starting to see office rent growth and "our asking rents go way up while LA has already gone there," according to Parker. In LA, new Class-A office rents have gone up to about $4 per SF per month, he said.
At the end of Q4 2106, OC had 2.26M SF of office under construction, while LA had 2.24M SF underway, said CBRE First VP Allison Schneider Kelly (center).
Pendulum Property Partners managing partner Kevin Hayes (far left) said he thinks this year the OC will experience a "really interesting dislocation." He expects Orange County will have a very strong economy, but a real estate pullback.
Wensley (far right) said he counted 29 cranes on a recent drive through DTLA, but only about two of them had any office component attached. The rest were multifamily, high-rise developments.
Kelly said the principal construction activity in both the OC and LA is multifamily.
She said CoStar reports LA had 27,757 multifamily units under construction at the end of Q4 2016, while OC had 10,982 units under construction.
Several panelists said office demand is lagging residential development.
Kelly said companies don’t need as much square footage as they used to because of technology and the way people are working. That affects office demand, because "they can do a lot more in less square footage," she said.