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Market Report – LA, OC Office Sales Gain Traction in Q2

Los Angeles Q2 Office Sales Reach $2B—Again

The California office market had a strong second quarter. Data compiled by our sister company CommercialCafé showed that office sales volume for the Los Angeles and Orange County markets was the best Q2 volume in the past five years.

The Los Angeles office market closed the second quarter with a total of 19 large office transactions and $2.2 billion in sales volume. Compared with the first quarter of the year, the number of sales has dropped, but dollar volume climbed 39%, indicating that buyer interest remains strong.

Office assets traded for an average price of $323 per square foot, marking an increase of 13% year-over-year and a 16% rise from Q1 to Q2. This increase is roughly on par with the five-year average.

JMB Realty closed the largest office sale in Los Angeles in Q2. The $573 million sale is the largest overall office transaction of the quarter on the California market. The 66.6% interest in the property situated at 1999 Avenue of the Stars in Century City was bought back by JMB Realty from Blackstone affiliate Equity Office Properties Trust in April. The price tag was nearly eight times higher than what Equity Office paid JMB for the partial stake in 1999, per Yardi Matrix data. The sale was also subject to a $425 million permanent loan from Goldman Sachs.

Orange County Office Sales Gain Traction in Q2

The office sales market in Orange County ended Q2 with nine major transactions and $462 million in sales volume, as per the CommercialCafé report. Despite the small number of transactions, sales volume increased 44% year-over-year, climbing over the five-year average.

Properties traded on the market at an average price of $214 per square foot, marking the fifth consecutive quarter boasting average prices above the $200 mark. An increase in the amount of square footage traded, and total dollar volume, suggests that investors might be changing their attention from Class A assets to more affordable alternatives.

Orange County’s largest Q2 deal boasted a price tag of $220 million. Emmes acquired the Class A, 12-story Centerview East & West buildings in Irvine, Calif., in April. The property was sold by Shorenstein, and the deal was funded by a $162 million loan held by KKR.

Build in 1988, the 280,870-square-foot Centerview East at 2010 Main St. is home to tenants such as ORION, the California State Teachers Retirement System and Mueller Prost. Situated at 1920 Main St., the 280,890 square-foot Centerview West currently houses tenants such as NAI Capital, Avanath Capital Management and Colony American Finance.

Methodology: CommercialCafé compiled the Q2 2017 office reports for Los Angeles and Orange County, including transactions recorded until July 14th, 2017.

The data was provided by Yardi Matrix, and it included transactions starting from $5 million involving properties larger than 50,000 square feet. Ownership stake, ground lease and portfolio transactions were excluded from the calculation of the average price per square foot.

Roxana Poenar

Roxana Poenar

With a taste for learning, Roxana joined PropertyShark in order to expand her knowledge of all things real estate. Passionate about reading and travelling, if she's not at her desk or engrossed in one of her books, then she's probably packing her backpack for a new adventure.

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