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Slowing Economy Hits Home; Rent 'Correction' Now Likely

LOS ANGELES-The economic slowdown is finally hitting home. Fizzling dot-coms, telecoms and tech firms are creating a glut of sublet space, causing competing owners to offer concessions to land the creme de la creme of tenants.

By Patricia L. Kirk | Updated on April 09, 2001

LOS ANGELES-The void created by exiting dot-com, high-tech and telecom firms, which bumped office vacancy to more than one million sf of space in LA’s Westside and South Bay areas over the last two quarters, may be just what the doctor ordered, according to Rick Buckley, senior managing director at Insignia ESG’s West LA office. He contends that the LA office market “could use a correction, comes at a good time to put reality back into the market.”

Buckley, who tracks vacancy rates in the LA Basin, told GlobeSt.com that the latest market analysis shows that about 1.3 million sf of space is available on the Westside and 756,784 sf is available in the South Bay.

Much of this available space is sublet space, which doesn’t directly affect owners because someone is still paying the rent. However, the presence of so much sublet space on the market has thrust owners into the position of competing for tenants, notes Buckley, who says that demand by tenants looking is down significantly, as well. Still, he says, there’s still large, creditworthy tenants–”great tenants”–seeking space, but they’re are waiting to see what the real estate market will do before making a commitment. “Large tenants are positioning for the future to take advantage of large blocks of space at favorable rents,” Buckley adds.

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