LOS ANGELES—The greater Los Angeles area saw a 1.7% increase in employment during the third quarter, compared to last year, according to the 3Q14 office report from Cushman & Wakefield. The report shows that the Los Angeles office market is beginning to gain momentum due to an overall healthy quarter with “significant growth that elevated market fundamentals to an unprecedented level.”

"The office market in Los Angeles has been struggling for a long time while the rest of the U.S picked up," Petra Durnin, managing director of research at Cushman & Wakefield, tells GlobeSt.com. "There were some glimmers of improvement for few quarters but now, along with data that backs up the feeling of improvement, the sentiment from landlords and brokers alike is that the Los Angeles office market is beginning a positive trend. The demand from the TAMI sector is buoying the L.A. market."

At a glance, the office market is performing well. Vacancy rates in the greater Los Angeles area dropped 1.5% year-over-year to 17%, while direct asking rents climbed by 3.5%. For class-A properties, rents averaged $2.89 per square foot, an additional 1.9% increase. Overall, the quarter saw 1.1 million square feet of absorption, the most of any quarter since 2008. Year-over-year absorption is 2.3 million square feet. According to Durnin, this is the most surprising finding in the report. "The level of activity in third quarter was most surprising. Leasing activity and vacancy have been steadily improving, but of the year-to-date 2.3 million square feet of occupancy gains, 1.1 million square feet occurred in just the third quarter, the most for any quarter since the recession," she says.

Leasing transaction activity, though, was down 5.1% year-over-year with 9.8 million total square feet leased during the quarter; however, the report estimates that the market will surpass 2013 total leasing activity this year. Non-traditional users make up the majority of the leasing transactions, in fact the creative and tech industries are driving much of the job growth. LADEC claims that L.A. now has more high-tech employees than any other U.S. region. These industries are impacting office activity in nearly every submarket. The leasing highlights from the quarter include Universal Music Group's 201,000-square-foot renewal at 2220 Colorado Ave. and Edmunds.com's lease for 133,036 square feet at 2401 Colorado Ave.

As for sales activity, the third quarter saw an improvement as compared with the first half of the year. A total of 2.9 million square feet of office properties traded hands this quarter, across product types. That brings the year-to-date total to 9.7 million square feet, compared to 15.3 million square feet sold last year. The sale of 801 Tower in Downtown Los Angeles is the highlight acquisition of the quarter. The property traded hands recently for $197 million.

West Los Angeles is still leading the greater Los Angeles area with a 13% vacancy rate, the lowest of any other L.A. submarket, and an average gross rental rate of $3.53 per square foot, the highest of any other submarket in Los Angeles. Los Angeles Central has the highest amount of office space under construction by far, with 883,161 square feet in the pipeline; however, this area also had a negative absorption rate during the quarter and a 20% vacancy rate. Vacancy rates in the remaining submarkets range from 14.2% to 23.2%, with rental rates ranging from $1.94 to $2.67 for the remaining submarkets.