Reis Updates Los Angeles Observers

The Reis Observer team posted 2nd Quarter 2010 Los Angeles market narratives for all property types. Here are brief summaries from each report.

Apartment Market Data
The market-rate investment-grade Los Angeles rental apartment market has stabilized as of the second quarter of 2010. Although the local average asking rent experienced the tenth-highest decline among the top Reis markets, this is a sign that other markets are seeing an upturn, rather than local weakness. The average effective rent edged upward. The vacancy rate is low, and little changed from a year earlier. And the population is growing while the construction pipeline continues to empty.

Los Angeles Office Space
The Los Angeles multi-tenant general use office market continued to deteriorate rapidly in the second quarter of 2010, although forecasts for the second half of the year have become more optimistic. Los Angeles still has the tenth lowest vacancy rate among the top markets tracked by Reis, but that is more a sign of even greater distress across the country than local strength. “The Los Angeles office market is at or near the bottom,” according to Grubb & Ellis. But this source reported negative net absorption in the second quarter for the eleventh quarter in a row.

Commercial Retail Property
Faced with a consumer recession of considerable magnitude, it is far better for Los Angeles to have started with a shortage of retail space than with a surplus. Thus, the Los Angeles neighborhood and community shopping center market still has the sixth lowest vacancy rate among the top markets tracked by Reis despite ongoing deterioration quarter after quarter, and local observers report non-shopping center street retail has been even worse affected. “The good news, according to the Los Angeles County Economic Development Corporation (LAEDC), is that while conditions are still getting worse for retail real estate, they are declining at a slower pace—an indication that a bottom may be near.

Commercial Industrial Real Estate
“All things considered, the market for industrial property in Los Angeles has held up remarkably well,” the Los Angeles County Economic Development Corporation (LAEDC) asserted in its mid-year report. According to annual data released by Reis, the multi-tenant, non-manufacturing portion of the market began 2010 with the second lowest vacancy rate and the eighth highest asking rent among the firm’s top metro areas. Although rents fell sharply in 2009, with the ninth worst decrease in the average asking rent among the top Reis markets, they had spiked in the 2005 to 2007 period and have merely returned to normal. Market watchers, moreover, are calling for an upward turn in the market for the first half of 2010.

Full versions of these reports including further detail on the 2nd quarter 2010 results are available now.