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High Office Vacancies Seen Through '91

March 08, 1987

Contrary to the single-digit vacancy forecasts of many commercial real estate firms, double-digit office vacancy rates will persist in Los Angeles through 1991, with annual demand declining by 1 million square feet to 4.3 million square feet over the next five years, according to economics researcher Austin G. Anderson.

Anderson, senior vice president of Economics Research Associates, West Los Angeles, conducted the study for the Building Owners and Managers Assn. (BOMA). It is published in BOMA's new 1987 Office Market Journal, available for $35 from the organization's office at 700 S. Flower St., Suite 418, Los Angeles 90017.

Another researcher, Selwyn Enzer, associate director of the USC Center for Future Studies, predicted that demand for single-family houses in the Los Angeles area will decline through the end of the century, while "small single-person occupancies and rentals" will increase as the population ages and young adults opt to live alone. Enzer's findings are also published in the Office Market Journal.

Two factors affecting office construction were the recently adopted tax reform bill and budgetary pressures preventing expanded high-tech defense spending, Anderson said.

"If all new office building construction ceased, the projected 4.3 million square foot demand figure would bring the market vacancy rate below 10% within 2 1/2 years, but scheduled completions now under construction are in excess of that demand," Anderson said. "That would suggest that overall vacancy will remain about 18% through midyear, with submarkets ranging from 8% to 28% vacant."

Earlier this year, Stan Ross of Kenneth Leventhal & Co., predicted that downtown office vacancy rates could decline from the present 15% level to about 8%. A similar forecast was issued by Grubb & Ellis Co., a large commercial realty concern.

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