Browsing articles in "Market research"
May 25, 2017
Synergy Blog Admin

Los Angeles Office Market Continues Hot Streak

Los Angeles Office Market

 

The LA office market has been hot lately, posting its best quarter since the financial crisis. Two of the biggest drivers of this growth have been entertainment companies and tech firms, which continue to expand at an impressive rate.

Veteran developers who have been building in the area for decades find themselves working extensively on office projects, citing the growth and opportunity they are providing. Buoyed by large office leases from companies such as City National Bank, Warner Music Group, and Kite Pharma, 2.1 million square feet of office space was absorbed in Los Angeles and Ventura Counties during one quarter, the most in one quarter since 2000.

The 2.1 million square feet figure comes from the change in occupied office space between the amounts of space leased compared to vacated, and is a measure often used to determine how well the real estate market is doing in a particular area. This change has increased the development of office spaces, as developers see the potential for markets. For example, the developer of projects such as the Water Garden in Santa Monica is currently working on three separate projects which are worth $500 million altogether.

One interesting dynamic is that the increased demand could mean that landlords will wield more power when the time comes to negotiate leases with tenants who are in particularly popular areas and neighborhoods. All of this activity in Los Angeles comes in contrast to many major cities through the country which have seen office markets slow.

Because Los Angeles was a little slower to recover from the recession, a bevy of new local businesses or either being formed or expanded, causing this high level of demand and activity. This growth mode means many are preparing for a strong year both in leasing and sales.

The biggest driver of the office market boom in recent months has come from the entertainment sector, with web-based companies such as Netflix, Hulu, and Amazon entering the market to create new shows and productions. They are joined by other media companies like Youtube, Snapchat, and BuzzFeed who all seek to create news and entertainment for their users. These types of companies have been especially drawn to area in Hollywood, Playa Vista, Santa Monica, and Venice.

What has resulted is a mix of Los Angeles and Silicon Valley, with these tech companies seek to start and expand the media content of their businesses. Included in new tenants in the area are companies such as Broad Green Pictures and Formosa Group, both of which are in the entertainment sector.

Another area that has seen a big boom is in Santa Monica, which has traditionall been a major hub for tech in Los Angelees. It is one of the most expensive areas in the city with landlords asking for $5.61 per square foot per month, but still accounted for a quarter of all of the absorption in Los Angeles. This $5.61 figure is up from $5.43 last quarter, an 18 cent growth.

As a whole, the vacancy rate in Los Angeles dropped to 13.3%, nearly 2 percentage points lower than a year before. Meanwhile, average asking prices for rents increased by 5 cents over that time, up to an average of $2.94 a square foot per month. In Downtown Los Angeles, vacancy rates sit at 16.8%, which is down almost 1 percent from the year before, while asking price for rents increased by 3 cents per square foot.

The areas that experienced the great activity for both leases and increases in rent were in western Los Angeles County, with cities such as Playa Vista, El Segundo, and Culver City.

Many experts are projecting a strong 2017 but a relative lull in 2018 and 2019. This is due to it being a full decade since the financial crisis, which slowed the market down. It is common for large leases to last for ten years, which means that fewer leases than normal will be hitting the market during 2018 and 2019, because less leases were being signed a decade ago.

However, that hasn’t slowed developers down, as there is about 2.2 million square feet of office space under construction across Los Angeles. The biggest area of growth is in Hollywood, which is seeing almost 600,000 square feet of office space being built. Developers are eager to cash in on the strong demand and increased rents being charged across the city.

Photo credit Flickr user: Maciek Lulko

Mar 28, 2016
Synergy Blog Admin

US Firms Locating Facilities In Baja Boosting Cross-Border Economics

Some US firms are choosing Mexico over China for manufacturing and assembly production, particularly Northern Baja, and we’ve assembled corporate and real estate experts, government and EDC officials to share their insight at Bisnow‘s first Future of the Cali-Baja Megaregion event April 7 at the Sheraton Hotel & Marina in Downtown San Diego.

US Firms Locating Facilities In Baja Boosting Cross-Border Economics

Northern Baja is particularly attractive since it is adjacent to its largest trading partner and conveniently located near large US distribution centers and the Ports of Long Beach and Los Angeles. The area offers a highly skilled labor force, with wages on average $2.50/hour in Mexico vs. $2.30/hour in China—one-fourth the minimum wage this side of the border, Synergy Real Estate Group Corporate Advisory president/CEO John Galaxidas tells us. John, one of our event speakers, specializes in corporate tenant representation on both sides of the border. His firm has five California offices and one in Tijuana.

China has long championed its position as the world’s lowest-cost manufacturing location, but in recent years has lagged behind other countries, particularly Mexico, he says. A survey by AlixPartners of 142 senior manufacturing and distribution executives found 86% plan to increase their foreign manufacturing presence closer to the US over the next two to three years. Data from Boston Consulting Group revealed manufacturing in Mexico is now 4% cheaper than in China.

US Firms Locating Facilities In Baja Boosting Cross-Border Economics

Another of our speakers, USD Burnham-Moores Center for Real Estate director Stath Karras, tells us the Cali-Baja Megaregion, which encompasses Tijuana, Tecate, Mexicali and Imperial and San Diego counties, is particularly attractive because of its intellectual resources. Stath is snapped here with his son James.

Stath says Tijuana’s CETYS Universidad is producing highly trained engineers and other professionals attractive to engineering and software development firms. “So we may be seeing more engineering needs filled in Mexico, like software engineers.”

US Firms Locating Facilities In Baja Boosting Cross-Border Economics

Among advantages provided by NAFTA is speedy, cost-efficient movement of products from Latin America to US markets, John says. Comparatively, the cost to ship goods to US East Coast markets from Mexico is less than half of products coming from China. Due to distance, customs and importation the difference in transit time from Mexico vs. China is as much as three weeks.

Stath tells us Northern Baja is attracting firms engaged in medical device assembly, which requires clean-room facilities, the most expensive type of assembly facility to build. John says locating in the Cali-Baja Megaregion provides US firms greater control over production and access to highly skilled labor, which is why Rochester, NH-based Phase 2 Medical Device Manufacturing chose to build a 30k SF manufacturing facility in Tijuana, rather than in China or Costa Rica.

He says electronic manufacturers like Mexico. There’s also a strong presence of military contractors, including Boeing, manufacturing military equipment there.

US Firms Locating Facilities In Baja Boosting Cross-Border Economics

Cross-border economic activity is having a positive impact on the economy and real estate on both sides of the Cali-Baja Megaregion. The benefits of bi-national economic activity has opened dialogue between the mayors of San Diego and Tijuana, as well as the business communities on both sides of the border.

Speaking at a NAIOP event, SD Mayor Kevin Faulconer, above, said strengthening San Diego’s vital relationship with Tijuana is among his highest priorities. “Organizations on both sides of the international border are collectively working to ensure country lines don’t act as economic barriers,” he said.

US Firms Locating Facilities In Baja Boosting Cross-Border Economics

A major milestone in this direction was the opening of the Cross Border Xpress (CBX) terminal at Tijuana International Airport in December 2015. The terminal, and its 390-foot Sky Bridge, provides a gateway to destinations in the Caribbean and Central and South America.

US Firms Locating Facilities In Baja Boosting Cross-Border Economics

Major US business operations in the Cali-Baja MegaRegion include Sempra Energy (above), which is developing energy infrastructure in Mexicali and plans to supply all of Mexico with natural gas. As a result, new homes are rising alongside a huge natural gas plant under construction between Ensenada and San Diego.

Kyocera has established a solar module manufacturing plant in Tijuana, and Trimco, a former LA-based company that manufacturers brass moldings for medical equipment, recently moved its production facility, Builders Brass de Mexico—the firm’s Mexican counterpart—to Tijuana. Trimco purchased a building in Oceanside for the firm’s HQ, which employs 250 people.

US Firms Locating Facilities In Baja Boosting Cross-Border Economics

LA-based Millennium Partners is under way on a 210-acre mixed-use development in the Otay Ranch area which was master planned by Stratford Land. Called Millenia (pictured is a rendering of the town center), it includes 3,000 residential units and 3.5M SF of commercial space (hospitality, retail, office and civic uses).

This Cali-Baja gateway project will focus on attracting tenants that work on both sides of the border, work for companies with headquarters in San Diego County and manufacturing facilities in Mexico, or are involved in the logistics of moving products to market. Construction on Phase 1 began in August 2013.

US Firms Locating Facilities In Baja Boosting Cross-Border Economics

“Tijuana’s economy is booming, and there is very little industrial space available,” John continues, noting vacancy, which was 15% a couple of years ago, is now just 3%. As a result, lots of new industrial REITs are being formed in Mexico to build new product to keep up with demand for additional warehouse space in the region.

That includes a partnership of Deutsche Bank and FIBRA Macquarie-Mexico (FIBRAMQ), a major Mexico-based commercial real estate developer of 274 industrial properties across that country.

JLL is putting together partnerships with US investors and Mexican REITs to build facilities all over Mexico, John says. Irvine-based SENTRE Partners has formed a partnership with Mexican industrial developer VESTA.

US Firms Locating Facilities In Baja Boosting Cross-Border Economics

There is lots of inexpensive land available in Baja (above is an industrial site for sale in Tijuana), John says. “The overall lower cost and efficiency of locating industrial facilities close to where labor lives makes perfect sense,“ he adds, citing the economics of warehousing goods in Tijuana vs. Otay Mesa, which offers the most competitive industrial rates in the region. While Otay Mesa industrial space rents for 60 to 70 cents/SF Gross, it is substantially less on the other side of the border at 40 to 50 cents.

Hear more from John and Stath at Bisnow’s The Future of the Cali-Baja Megaregion event on April 7, beginning at 7am with breakfast and networking at the Sheraton Hotel & Marina, 590 Harbor Island Dr, in Downtown San Diego.

via US Firms Locating Facilities In Baja Boosting Cross-Border Economics

Sep 24, 2012
Synergy Blog Admin

Los Angeles Office Rates Still Flat Q3 2012

By John Galaxidas

CEO/President

Synergy Real Estate Group, Corporate Advisory (www.synreg.com)

The Los Angeles Class A office leasing market continues to remain flat in Q3 2012. Office leasing activity (as measured by the total square foot-age of new leases and lease renewals executed) was 34% below average quarterly leasing activity in 2011.

The availability rate for Class A office space continues to hover slightly above 19%, the same rate for the past 2.5 years. To put this in perspective, Los Angeles office rental rates bottomed out at 12% in 2006 and peaked at 19.9% in 2010, average office availability is now flat at 18.9% in 2012.

The only place in Los Angeles where rental rates have decreased slightly is in the Westside where the average asking rates for Westside Class A Office Space is $2.87 per month, 1.40% lower than 12 months ago.

Westside Los Angeles Office Space

Beverly Hills: 137 Locations and Subleases
Sizes: 1,599 Sqft to 105,000 Sqft
Class A Starting at $1.99/Sqft/Month
Class B Starting at $1.95/Sqft/Month

Brentwood: 12 Locations and Subleases
Sizes: 1,697 Sqft to 24,185 Sqft
Class A Starting at $2.00/Sqft/Month
Class B Starting at $1.75/Sqft/Month

Century City: 29 Locations and Subleases
Sizes: 1,764 Sqft to 42,976 Sqft
Class A Starting at $2.00/Sqft/Month

Cheviot Hills: 45 Locations and Subleases
Sizes: 1,734 Sqft to 26,826 Sqft
Class A Starting at $2.30/Sqft/Month
Class B Starting at $1.65/Sqft/Month

Culver City: 69 Locations and Subleases
Sizes: 1,975 Sqft to 156,371 Sqft
Class A Starting at $1.75/Sqft/Month
Class B Starting at $1.65/Sqft/Month

Malibu: 8 Locations and Subleases
Sizes: 1,700 Sqft to 18,000 Sqft
Class A Starting at $3.25/Sqft/Month
Class B Starting at $3.10/Sqft/Month

Mar Vista: 12 Locations and Subleases
Sizes: 1,917 Sqft to 15,214 Sqft
Class A Starting at $2.25/Sqft/Month
Class B Starting at $1.61/Sqft/Month

Marina Del Rey: 28 Locations and Subleases
Sizes: 1,800 Sqft to 33,653 Sqft
Class A Starting at $2.10/Sqft/Month
Class B Starting at $1.69/Sqft/Month

Palms: 20 Locations and Subleases
Sizes: 2,000 Sqft to 17,581 Sqft
Class A Starting at $1.95/Sqft/Month
Class B Starting at $1.40/Sqft/Month

Pico Robertson: 15 Locations and Subleases
Sizes: 1,680 Sqft to 19,932 Sqft
Class A Starting at $2.10/Sqft/Month
Class B Starting at $1.65/Sqft/Month

Santa Monica: 94 Locations and Subleases
Sizes: 1,845 Sqft to 95,113 Sqft
Class A Starting at $1.95/Sqft/Month
Class B Starting at $1.30/Sqft/Month

Sawtelle: 39 Locations and Subleases
Sizes: 1,935 Sqft to 54,000 Sqft
Class A Starting at $2.21/Sqft/Month
Class B Starting at $1.90/Sqft/Month

Venice: 27 Locations and Subleases
Sizes: 1,900 Sqft to 16,000 Sqft
Class A Starting at $2.75/Sqft/Month
Class B Starting at $2.59/Sqft/Month

West Los Angeles: 83 Locations and Subleases
Sizes: 1,800 Sqft to 35,304 Sqft
Class A Starting at $1.50/Sqft/Month
Class B Starting at $1.50/Sqft/Month

Westwood: 24 Locations and Subleases
Sizes: 1,713 Sqft to 51,972 Sqft
Class A Starting at $1.95/Sqft/Month
Class B Starting at $1.75/Sqft/Month

Downtown Los Angeles asking rates have increased 5% over the past four quarters. The average asking rates for all submarkets have remained relatively flat for the past 10 quarters after falling off from a high of $3.01 in 2008.

Downtown Los Angeles Office Space

Fashion District: 10 Locations and Subleases
Sizes: 1,750 Sqft to 133,700 Sqft
Class B Starting at $0.85/Sqft/Month

Little Tokyo: 1 Location and Subleases
Sizes: 3,000 Sqft to 28,000 Sqft
Class B Starting at $0.60/Sqft/Month

LA CBD – Financial District: 97 Locations and Subleases
Sizes: 1,808 Sqft to 481,395Sqft
Class A Starting at $1.50/Sqft/Month
Class B Starting at $1.25/Sqft/Month

South Park: 29 Locations and Subleases
Sizes: 2,000 Sqft to 48,964 Sqft
Class A Starting at $1.59/Sqft/Month
Class B Starting at $1.25/Sqft/Month

Warehouse – Wholesale District: 12 Locations and Subleases
Sizes: 3,449 Sqft to 71,446 Sqft
Class A Starting at $2.25/Sqft/Month
Class B Starting at $1.10/Sqft/Month

The remainder of Los Angeles submarkets is at or experienced a slight increase in availability. Average asking rates for Class A space across Los Angeles submarkets increased to $2.69 per month, 2.3% higher than 12 months ago.

“Los Angeles rental rates will not always stay flat, they will likely increase in the coming years,” said John Galaxidas, CEO/President of Synergy Real Estate Group, Corporate Advisory, the largest network of Independent Tenant Advisors in North America with offices in Downtown Los Angeles, Inland Empire, Irvine and San Diego. “Now is an opportune time to renew your lease securing a lower rental rate or relocate to higher quality, more cost effective space,” said Galaxidas

With a Tenant Broker you can feel confident that you are being presented every possible opportunity in the market while securing the lowest price possible on space, a virtue that tenant advisors at Synergy Real Estate Group prides themselves on providing to their clients.

No Cost for our Service

The best part using a Tenant Rep is there is no cost associated with our service. Tenant Brokers get compensated only when the deal closes. The listing agent who represents the Property Owner splits the commission with the Tenant Broker when the deal is consummated.

Uncover “Off-Market” Opportunities

Not only do we have access to every commercial listing in the market, we inventory the market on a weekly basis, “uncovering “off-market” opportunities.

When it comes to negotiating a lease or purchase contract, we will put out proposals on your behalf leveraging, one Landlord against the other to secure the best terms and rate on space.

Tenant representatives are becoming more valuable than ever. With the upturn in the Los Angeles market, as the economy rebounds and demand increases, businesses need to be strategic in the negotiation process.

If you are seeking assistance relocating, acquiring, disposing, subleasing and/or renegotiating your next space, contact Synergy Real Estate Group at: 323-776-3344 or visit our web site at: www.LosAngelesOfficeSpace.net.

Jul 27, 2012
Synergy Blog Admin

World’s Priciest Office Locations

A semi-annual real estate industry survey released the most expensive office markets world-wide. Overall, occupancy costs increased by an average 3.6% worldwide led by Asia-Pacific at 7.8%, Americas at 5.0%, and EMEA at 0.4%. 80 markets experienced increase in occupancy costs, while 24 markets occupancy costs decreased, and 29 markets remained stable.  The most costly office markets have characteristics, which include a diversified economic base, limited vacant institutional quality space and strong currencies.

Occupancy cost refers to rent, local taxes and service charges.

1. Hong Kong (Central), Hong Kong
$248.83 per square foot annually

Hong Kong is the number one location for global office occupiers, has meager land for development, leading to the highest office rents.
While at the top of the list, Hong Kong experienced the largest annual decline of the markets in the survey, at -17.2%. This can be attributed to increasing pressure on the global financial services industry, which makes up a large majority of tenants. Some of these firms have consolidated space requirements leading to increased availability in the central business district of Hong Kong.
The demand for office space is decreasing brings the astronomical rent prices closer to Earth. Hong Kong is one of the most volatile markets, it was the first market to show recovery in 2009, and it’s the first now to show the world’s economic slow down.

2. London (West End), United Kingdom
$186.49 per square foot annually

London’s West end experience a 4.7% year-over-year increase
West End – formerly the world’s most expensive – slowed last year after a rapid 31% climb in 2010, allowing offices in Hong Kong to become the world’s priciest.

3. Tokyo, Japan
$180.76 per square foot annually

Tokyo occupancy costs climbed 7%, landing it at the second most expensive city in Asia this year. Two years prior, Tokyo was the most expensive city for office space in the world, followed by London and Hong Kong.

4. Beijing (Jianguomen), China
$166.89 per square foot annually

Rent for Beijng office space soared 49.4% in the past year – the largest annual change of occupancy costs for all markets. The increase in price can be attributed to vacancy rates reaching below 5%, increasing rental prices due to supply shortages. Beijing’s rise was driven by strong demand from domestic financial institutions, combined with lack of available space on Finance Street, which is 6th on the list.

5. Moscow, Russian Federation
$158.72 per square foot annually

Moscow experienced the largest increase in costs for the Europe, Middle East & Africa region as its office space costs grew by 19.1%. This increase was driven by strong tenant demand in the central business district, where vacancy is relatively low and new development is extremely limited.

32nd on the list is Los Angeles, California
$77.41 per square foot annually

For the first time in years Los Angeles vacancy rates have dropped slightly. Los Angeles County slipped to 18.6% from 19.1% in last year’s second quarter. This was the first year-to-year vacancy decline since the second quarter of 2007, explaining the increase in occupancy costs. However, this trend does not signal that landlords’ troubles are nearly over. Most markets are considered quite soft, which places tenants are in a strategic bargaining position.

Tech companies have been increasing their tenancy in Los Angeles, making Santa Monica and Venice’s occupancy rates decrease. Tenants have been also occupying nearby areas such as Culver City and Playa Vista, where office space is more plentiful and rents are cheaper.
Downtown has also experience an increase, after years of a weak market, attributed to downtown becoming a growing residential neighborhood with multiplying recreational options such as bars, restaurants and professional sports. With efforts such as LA Live and recent renovations of plazas, tenants are not moving out of the evolving area.
On the other hand, vacancy in older office buildings near Los Angeles International Airport, continually rise, topping 35% in the second quarter.

Feb 13, 2012
Synergy Blog Admin

Drop in San Diego Office Space Vacancies

For the first time since 2007, the commercial office space vacancy rate for San Diego has dropped below the 14% mark.

In the fourth quarter of 2011, the San Diego office leasing vacancy rate dropped to 13.8 percent, the lowest it had been since it was at 14 percent in the third quarter of 2010.

The San Diego office rates still have a long way to fall, if it is to approach its recent low of 8.4 percent, which it hit in 2005, however it has already come a long way from its high of 15.3 percent in the first quarter of 2010.

The San Diego commercial real estate vacancy rate is still slightly higher than the national average, which currently sits at 13 percent, down from 13.2 percent in the third quarter and 13.5 percent from the year before.

The rental rate for San Diego office space however held almost constant from the third to fourth quarter, moving down one cent to $25.40, and for the year, was down from $26.05.

With San Diego office vacancy rates falling, one would expect office rental rates to start inching down but this is far from the case.

Over the last two years, vacancy rates have been on a wild “up and down” roller coaster ride, said John Galaxidas, President, Synergy Real Estate Group, Corporate Advisory, the largest group of independent tenant representatives in North America.

As we enter into the Presidential election year of 2012, vacancy rates will inch down creating a slight uptick in San Diego office rental rates, eventually leveling off or decreasing again slightly by end of fourth quarter of 2012.

So, if you are seeking to secure a great rental rate on San Diego office space, now is the time to either renegotiate your current lease or relocate to nicer, more cost effective office space.

At Synergy Real Estate Group, Corporate Advisory (www.synreg.com) our goal is to serve as the Tenant’s Advocate and resource to companies seeking commercial space in the San Diego area by providing them with detailed market information and local expertise to better understand the local commercial real estate market.

This is a no-cost, no-obligation service to your company to help you determine if you can save money cutting your facility cost.

We understand the San Diego office rental market and since we only work with tenants we are able to show more properties than typical listing brokers and we avoid any conflicts of interest during the negotiation process. If you’re unsure of the benefits of using a tenant representative, call us at: 888-979-7787 or visit our web site at www.synreg.com and we will be glad to go over the benefits our company provides relative to other firms.