Sizzling demand for offices, warehouses and retail space is hitting Southern California and other major urban centers. That is resulting in smaller cubicles and longer commutes for workers, higher prices for consumers and closure of businesses unable to meet landlords' demands for higher rent.
Office rents have climbed more than 25% on average in the last three years in much of Los Angeles County. In some of Orange County's thriving office parks, rents have risen by more than 50% in that period, with the Irvine Spectrum posting the region's biggest average jump, at nearly 57%, according to a recent report from real estate brokerage Cushman & Wakefield.
For The Record
Los Angeles Times Tuesday March 13, 2007 Home Edition Main News Part A Page 2 National Desk 1 inches; 79 words Type of Material: Correction
Commercial rents: A chart accompanying an article in Section A on Saturday about rising rents for commercial real estate in Southern California omitted the percentage changes in rents for the areas listed. A corrected chart appears at right.
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Lease hikes
Percentage change in office rents from 2003 and average monthly rates in 2006
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Market Pctg. Rate (per) change sq. ft.) Irvine Spectrum 56.9% $3.17 Valencia/Newhall 41.7% $2.72 Costa Mesa 39.1% $2.99 Santa Monica 33.2% $4.09 Westwood 28.7% $3.77
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Source: Cushman & Wakefield
Rents on hot retail strips such as Melrose Avenue, Rodeo Drive and Robertson Boulevard have more than doubled in the last two years.
Vacancies have plunged to well below 10% in many areas, making it harder for businesses to find space. Only 3% of the region's industrial space -- used for warehouses and factories -- is available, a level that is considered drastically low.
Shoe store operator Young Moon shuttered the Santa Monica branch of his O' My Sole chain in December when his rent went up and said he planned to boost prices as much as 6% at his seven other Southern California stores this year to help meet higher rent charges.
"Rents are too high," he said.
While the residential real estate market has flattened, a strong global economy is boosting demand worldwide for space for offices, warehouses, retailers and other businesses. In Southern California the market is particularly tight, in part because of a lack of available land and regulations that have made it difficult for developers to construct office or industrial buildings.
Surging international trade through the region's ports is pushing up demand for warehouses to hold and distribute goods.
In the Inland Empire, where relatively more raw land is available for construction, hundreds of thousands of square feet of warehouse and distribution buildings are being built every year -- and nearly all of them are leased or sold.
"There is no historical precedent for this," said broker Jim Center of commercial real estate firm Grubb & Ellis.
Faced with a rent increase of about 60% to keep his offices near Ontario Airport, Carlos Lacambra was prompted to search for new digs to house the 160 workers at his branch of A-Check America, a business that does background checks and drug tests for employers.
