Over Lease California by prettytulips


									Te n a n t ’ s    Guide             North        American            Markets                   Second                   Quarter                   2009

Los Angeles, California
Overview                                                                  Major Transactions
The class A office leasing market in Los Angeles continued its            Tenant/Buyer                           Size            Type            Lease/Sale
downward slide in the 2nd quarter 2009, as vacancy rose for the           Kirkland & Ellis                       90,000          Office          Lease
seventh consecutive quarter to 12.9%, and quoted rents dropped            Seyfarth Shaw                          50,000          Office          Lease
another 2% since peaking in the 3rd quarter 2008. The three-              Bidz.com                               50,000          Office          Lease
percentage point increase in vacancy over the past 12 months
                                                                          Keiwit                                 50,000          Office          Lease
represents a 30% increase since the 3rd quarter 2008. Quoted
                                                                          REOTrans                               50,000          Office          Lease
rents, however, have only fallen 4.3% during this same period.
                                                                          Net2EZ                                 48,000          Office          Lease
As is the case in most declining markets, quoted rents do not tell the    Towers Perrin Forster & Crosby 43,000                  Office          Lease
whole story. While landlords have been slow to reduce their asking
rates, actual rents in fully negotiated transactions are as low as 30%
                                                                          Vacancy Rate
below quoted rents in submarkets that had previously reached lofty                                Q4 2008            Q1 2009             Q2 2009
levels.                                                                   15%

Total leasing activity during the quarter was at the lowest level since
the statistic has been tracked, dating back to 1996. This comes as        10%
no surprise, as most companies put leasing decisions on hold while
they seek to understand the true impact of the recession and the
capital crisis.
Downtown Los Angeles was the only strong performer, as vacancy
remained relatively steady at 12.9%, and rents remained flat over
the past four quarters. All other submarkets have experienced
significant increases in vacancy in the past year (Westside 56%                    ClassA ClassB ClassA ClassB ClassA ClassB ClassA ClassB ClassA ClassB ClassA ClassB
                                                                                   Downtown       Westside      South Bay Valley-West Valley-East All Submarkets
increase; East Valley 42% increase; South Bay 30% increase; West
Valley 26% increase.)                                                     Average Rental Rates
                                                                          Downtown                     Q4 2008 Q1 2009                      Q2 2009
                                                                          Class A Office               $33.72            $34.30             $33.70
Market Trends                                                             Class B Office               $27.36            $27.35             $25.80
  Ÿ Vacancy will continue to rise over the next several quarters until
    companies begin hiring again.                                         Greater Westside Q4 2008                       Q1 2009            Q2 2009
                                                                          Class A Office   $43.56                        $41.70             $40.30
  Ÿ Real rents will continue to fall over the next several quarters as
                                                                          Class B Office   $37.92                        $36.70             $35.75
    hungry landlords reach the point where they are no longer
    willing to sit on vacant space.                                       South Bay                    Q4 2008 Q1 2009                      Q2 2009
  Ÿ As leases expire over the next few years, tenants that have been      Class A Office               $25.32            $25.00             $25.20
    paying for excess space they cannot sublease will structure new       Class B Office               $23.04            $22.90             $22.70
    leases for less space, propping up vacancy levels.                    Valley-West                  Q4 2008 Q1 2009                      Q2 2009
                                                                          Class A Office               $29.64            $28.80             $28.20
                                                                          Class B Office               $25.08            $25.20             $24.12
Tenant's Perspective
The tenant's market is in full swing. Competition among landlords         Vally-East                   Q4 2008 Q1 2009                      Q2 2009
                                                                          Class A Office               $35.40            $34.40             $33.95
for the few tenants in the market is severe. Tenants that conduct a
                                                                          Class B Office               $29.28            $28.20             $28.20
process to evaluate alternatives in the market will benefit from such
competition, especially tenants considering renewing leases. Empty        All Submarkets               Q4 2008 Q1 2009                      Q2 2009
threats to move are not nearly enough to scare landlords into             Class A Office               $35.16            $34.45             $33.95
stretching to their ultimate bottom line.                                 Class B Office               $28.32            $28.10             $27.50

                                                                          Prepared By CresaPartners
                                                                          11726 San Vicente Blvd., Suite 500, Los Angeles, CA 90049
                                                                          310.207.1700    www.cresapartners.com

To top