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Report: Rebound Begins in Second Half

LOS ANGELES-Even as this wave of downsizing subsides, the effects will continue to ripple through the economy and adversely affect real estate markets. The first reliable evidence of a recovery will not likely materialize until the second half of this year, according to a report issued by Insignia/ESG.

By Peter Landau | Updated on March 06, 2002

LOS ANGELES-The unemployment rate in Los Angeles shot up from 4.7% to 6% in 2001, and recent reports have estimated a net loss of at least 50,000 more jobs in Los Angeles County in the coming year. Even as this wave of downsizing subsides, the effects will continue to ripple through the economy and adversely affect real estate markets. The first reliable evidence of a recovery will not likely materialize until the second half of this year, according to a report issued by Insignia/ESG.

Whereas Los Angeles’ last recession in the early ’90s was characterized by a server oversupply of office space, today’s real estate market was much better prepared for an economic downtown. Although tenant demand for space contracted in 2001, the conservative rates of development for the past 10 years have undoubtedly mitigated the impact of the current recession, according to Insignia/ESG.

The report goes on to say that what is interesting about this contraction in demand is that it came after the tech land grab during which large commitments were made in anticipation of future growth, normally backed by letters of credit. When the bubble burst, tenants were quickly forced to downsize despite having made these large lease commitments. Available space in Los Angeles increased from 14.7% to 18.2% during 2001. During that time, the proportion of space available for sublease increased dramatically. In the West Los Angeles market, home to many of the dot.com casualties, the amount of available sublease space more than doubled over the past year.

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