Wednesday, December 06, 2006

Office Space

Vacancy rates for office space in Los Angeles County are at a 15 year low and rents are increasing, says the Casden Office and Industrial Market Forecast put out recently by the Lusk Center for Real Estate at USC. The full report is available from the Center for $75. See the article by Kevin Smith of the Pasadena Star News for a few key items of interest:

[Los Angeles County's] industrial market—the largest industrial center in the United States—also boasts the lowest vacancy rate at 1.6 percent. But as low as that rate is, the San Gabriel Valley has it beat, with an industrial vacancy rate of just 1.1 percent...

Industrial construction activity is about half of last year's levels, at 4.4 million square feet year-to-date, mainly occurring i[n] the San Gabriel Valley and northern Los Angeles County.

"There's limited land on which to build," [USC Professor Delores Conway, director of the Forecast] said.

In a continuing trend, the Inland Empire is still the nation's top market for building big industrial warehouses and distribution centers.

See also: a summary press release of the report, Rodd Cayton's Press Enterprise article, and Gregory Wilcox's LA Daily News article.

Two quick observations:

First, the vast majority of cities across the country would sell their mayor's soul for the sort of local economy that is currently normal in southern California. If there are problems with our city governments, it is not the fault of our local economies. Our city coffers should contain ample amounts of tax dollars.

Second, although every city has different needs and circumstances, if they want to develop and maintain a stable, diversified economy they would do well to focus on policies regarding land use, taxation, regulation, etc. that attract other businesses besides retail sales. Big box stores and car dealerships that bring in large chunks of sales tax dollars are easy and attractive targets, but crafting policies that encourage industrial and office-based businesses (by, say, ensuring space for such enterprises) is a much better strategy for the long-term health of our local economies. Unfortunately, many city officials don't act as if this simple economic fact was true.

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