The underlying strength of the Downtown LA Renaissance took the market to new heights in 2016. Residential development led the way with a record-breaking 2,671 units coming online at 11 projects and 3,968 units breaking ground in 2016.
With construction cranes already filling the sky, more records are likely to be broken in years to come, as 48 new projects were proposed in 2016, 23 of those in Q4, with:
- Over 15,000 residential units
- 2 million SF of office
- 1 million SF of retail
- Almost 2,000 hotel rooms
Leveraging the momentum of the residential sector, the office market had its third straight year of positive net absorption, highlighted by Warner Music Group's decision to relocate to The Ford Factory in the Arts District, setting the stage for a new wave of office and retail tenants who are likely to follow.
While Warner Music made the biggest splash, equally significant was the expansion of City National Bank, who added more than 100,000 SF, demonstrating the continuing appeal of Downtown to traditional tenants, such as HDR Engineering and Greenberg Gross, who both signed new leases in Q4.
Retail tenants also continued to flock to DTLA in Q4 with openings from national chains like Footaction and Petco, and hip boutiques like Detroit-based Shinola. The food scene is thriving as well, with new offerings such as Karl Strauss Brewing Co, Tom George Restaurant, Sonoratown Tacos, and Blue Bottle Coffee.
Downtown's appeal as a travel destination increased, with hotel operators showing significant gains in occupancy, average daily rate, and RevPar. Joining an expanding list of projects were proposals for a new Cambria Hotel near LA Live and yet another historic conversion on Broadway by the Onni Group.
Finally, Q4 saw a continuation of 2016's momentum on the cultural front as well. The Broad's first year attendance was 900,000, almost three times initial projections. DTLA's public space offerings were also enhanced with the opening of the new Arts District Park. In terms of transit, weekday ridership on the Expo Line was up 78% and weekend ridership more than doubled since the opening of the extension to Santa Monica.
Q4 Market Report Highlights:
- 16.8% Office Vacancy; 4.5% decrease YOY
- $3.34 PSF Class-A Lease Rate; 7.1% increase YOY
- 2,824,467SF YTD Leasing Activity
- 4.0% Vacancy Rate: 51.2% decrease YOY
- $2.64 PSF Lease Rate; 2.7% increase YOY
- 80.4% YTD Occupancy Rate; 6.6% increase YOY
- $214.00 YTD Average Daily Rate; 9.7% increase YOY
- $172.05 YTD Average RevPAR; 16.7% increase YOY
- 90.6% Occupancy rate for Apartments; 1.0% increase YOY
- $2.81 PSF Average for Apartments; 4.5% increase YOY
- $2,564 Average Effective Rent per Unit: 3.0% increase YOY