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LA Office Sales Volume Drops 36% in Q1 2017

| Commercial Real Estate News, Deals, Market Reports, Office| Views: 904


Executive summary

Following its most active year in a decade, the Los Angeles office market recorded a rather slow first quarter in 2017, in terms of both sales volume and average price per square foot. However, with an unemployment rate of 4.8% as of February and solid job gains driving demand across all asset classes, office sales activity in L.A. County is likely to pick up the pace in the upcoming months.

We used Yardi Matrix data to analyze all Q1 sales for office buildings larger than 50,000 square feet (see ‘Methodology’ section). We also looked at new office projects scheduled for completion in the second quarter of 2017, using the same data source.

Despite the drop in sales volume in Q1, Los Angeles County fared better than other California office markets: the San Francisco County office scene came in second, with $1.35 billion in sales volume in Q1, while the Bay Area market was home to 17 deals totaling $1.30 billion. The slowest start of the year among the markets we analyzed was recorded in Sacramento, where just three office deals exceeded the $5 million mark, totaling $50 million in Q1 sales volume.

Office Sales Volume Drops 36% Y-o-Y in Q1

Office sales volume in L.A. County totaled $1.5 billion in Q1 2017, a 36% drop year-over-year. Though it did not rise to the level recorded in Q1 2016, when 17 properties traded for $2.35 billion, the total sales volume in the first quarter of 2017 was nearly four times higher than the number recorded in Q1 2013 and 45% higher than in Q1 2015. A total of 22 office deals closed in the first three months of 2017, encompassing 5 million square feet of space and totaling $1.5 billion in dollar volume. By comparison, the market saw 21 office deals close in Q4 2016 for $3.29 billion—the best quarter in the past four years in terms of office sales.

Average Price per Square Foot Down 46% from Q4 2016

The average price per square foot for a Los Angeles County office building dropped nearly 46% from Q4 2016, when assets traded at $539 per square foot. The average price rested at $294 in Q1 2017—a 21% drop year-over-year and the lowest quarterly number since Q4 2015 (our calculation of the average per-square-foot price excluded partial stake, ground lease and portfolio deals). Nonetheless, the drastic drop in average per-square-foot prices is likely just a consequence of heavy new office construction in the area and rising vacancy rates–according to Colliers, there is currently 5.6 million square feet of new office development in the Los Angeles Basin market, most of which is scheduled for delivery in 2017.

Largest Sale of Q1 – Warner Center Buildings Trade for $236M

There were 22 office deals over $5 million and exceeding 50,000 square feet to trade on the Los Angeles office market in the first months of 2017, for a total sales volume of $1.5 billion. The largest office transaction recorded in Q1 closed in February, when Oaktree Capital Management paid $236 million to Hines Interests for five buildings within the Warner Center development in Woodland Hills, Calif. The office properties located at 21271, 21281 and 21301 Burbank Blvd. traded alongside 5700 and 5820 Canoga Ave. for $291 per square foot, together with two parking garages, according to The Real Deal. Woodland Hills was home to two other large Q1 office sales—the $51 million sale of 21021 and 21031 Ventura Blvd. and the $22 million sale of 6200 Canoga Ave. Los Angeles was the setting for five office transactions so far in 2017, the largest one being the $168 million sale of three Malibu and Playa Vista assets to Chicago-based LaSalle Investment Management. Check out the full list of large Q1 office transactions below:

AddressCitySale PriceBuyerSeller
21271, 21281 & 21301 Burbank Blvd, 5700 & 5820 Canoga AvenueWoodland Hills$235,500,000Oaktree Capital ManagementHines Interests
655 North Central AvenueGlendale$179,000,000DivcoWestPGIM Real Estate
5340 Alla Road, 12901 West Jefferson Blvd, 22619 Pacific Coast HwyLos Angeles$168,000,000LaSalle Investment ManagementCanyon Partners Real Estate + Pacshore Partners
1000, 1127-1131 South Fremont AvenueAlhambra$156,587,000US-China Real Estate Investment CenterRatkovitch Company
1450 San Pablo StreetLos Angeles$112,000,000University of Southern CaliforniaDoheny Eye Institute
611 North Brand BlvdGlendale$83,000,000Onni GroupU.S. Bank - REO
300, 400, 430, 440, 450 East Huntington DriveArcadia$62,070,000China Oil USABend Properties
2411 West Olive AvenueBurbank$52,500,000Menlo EquitiesTIER REIT
1314 7th StreetSanta Monica$52,500,000DivcoWestPacshore Partners + Alcion Ventures
2300 East Imperial HwyEl Segundo$52,000,000Live Oak Properties Uniwell Corporation
21021 & 21031 Ventura BlvdWoodland Hills$51,125,000The Somerset GroupEquity Office Properties Trust
200 South Los Robles AvenuePasadena$46,000,000J. Iloulian RugsAmerican Realty Advisors
3330 Cahuenga Blvd WestLos Angeles$35,999,5004M InvestmentsEquity Office Properties Trust
3402 Pico Blvd, 2403 Centinela AvenueSanta Monica$35,000,000Cypress Creek RenewablesHudson Pacific Properties
10585 & 10635 Santa Monica BlvdLos Angeles$33,428,000Onni GroupAlaska Permanent Fund
4330 Park Terrace DriveWestlake Village$26,750,000A group of investorsBarker Pacific Group
9320 Telstar AvenueEl Monte$26,000,000Charles CompanyKennedy Wilson
6700 East Pacific Coast HwyLong Beach$24,000,000ValueRock Realty PartnersColton Company, The
6200 Canoga AvenueWoodland Hills$22,000,000Gelb GroupMaxxam Enterprises
520 North Central AvenueGlendale$19,565,000Lincoln Property Company + Long Wharf CapitalPGIM Real Estate
225 East Colorado BlvdPasadena$15,000,000ANDA Realty CapitalBarker Pacific Group
3731 Stocker StreetLos Angeles$13,327,500Sharp Capital + Cole Capital Group represented by Dunn Property Group

What’s Next? Office Projects on Track for Q2 Delivery

There are currently 11 large office developments totaling 2.8 million square feet scheduled for completion in Q2 2017, 8 of them located in Los Angeles. The largest project to come online in Q2 will also be the tallest building in L.A. and California and the tallest building west of the Mississippi River: Hanjin International’s 73-story Wilshire Grand Center at 900 Wilshire Blvd. The 1,100-foot skyscraper has surpassed the U.S. Bank Tower by 82 feet, and is scheduled for completion in late May. The developer is a subsidiary of South Korea-based Hanjin Group, which is also the parent company of the now-bankrupt Hanjin Shipping.


  • Parameters: over 50,000 square feet, over $5 million in sale price;
  • Transactions recorded up until April 12th, 2017;
  • We excluded ground lease, ownership stake, controlling interest and portfolio deals from our calculation of the average price per square foot;
  • Data source: Yardi Matrix.

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