South Bay Rental Rate Growth Slows Slightly
- After two consecutive quarters of negative absorption, the South Bay market rebounded with positive demand of 58,600 square feet.
- Average asking rents for the overall market continued to rise, albeit less rapidly than in previous quarters, pushing up to $2.94 per square foot (PSF) full service gross (FSG) from $2.91 last quarter.
- Leasing stayed above the half-million mark with 612,200 square feet of activity recorded.
- RREEF Management’s project at 3200 N. Sepulveda Boulevard in Manhattan Beach was added to the pipeline, which now has 730,900 square feet in development.
- Sales activity consisted of five sales combining for a total of $989.2 million in value.
The outlook for the South Bay market remains positive. Despite this quarter’s increase, continued positive demand should push vacancy down in late 2019 and early 2020 due to moderate leasing activity in 2019. The South Bay market has managed to defy rental rate expectations, routinely posting year-over-year growth in the 6-8% range. The attractiveness of the market, both in terms of office inventory and quality of life, should continue leading to stable, if not rising, rates.
Heightened investor interest and activity will be seen across the whole market. In addition to core investment properties, value-add and creative conversion projects will remain part of the investment environment.