Santa Monica, which is located to the west of the city Los Angeles, is a densely populated (pop. 89,736, 2010 census) beach community known for its oceanside location, numerous tourist attractions, and a high quality of life. This article will primarily focus on the new development and hotel trends within Santa Monica.
Driven by the tourism and tech industries, Santa Monica’s lodging market continues to boom, reaching record levels. While the city has historically had a reputation for slow development, developers have persisted in recent years and the city has made leaps and bounds with several development projects currently underway. In addition to new build projects, investors are eager to enter the market as they look toward redevelopment opportunities.
Santa Monica, often referred to as part of “Silicon Beach”, has quickly become the heart of Los Angeles’ fast-growing tech scene, comprising 25% of Santa Monica’s workforce. Silicon Beach, which initially referred to Venice and Santa Monica, has expanded south along the coast and inland to Playa del Rey and Culver City. For example, in the past year, Sony Computer Entertainment and Yahoo, have left the core of Silicon Beach for Playa Vista.12 The desirability of office space in Santa Monica, coupled with the city’s limitations on new urban development, has created an insufficient availability and premium rental rates. In addition to the lack of affordable office space, soaring housing costs in Santa Monica have continued to pose a problem for local employers looking to hire the Millennial workforce.
According to the Q2 of 2015 REIS office space data for the Los Angeles market place, the Santa Monica submarket registered the third lowest vacancy rate (8.5%) behind Century City and Beverly Hills. In terms of the average asking lease rate, Santa Monica’s $51.84 per ft2 is the highest in all of Los Angeles County. Forecasts for the remainder of 2015 and also into 2016 illustrate a continuation of this trend. The low office vacancy and average lease rates reflect Santa Monica’s overall desirability relative to the Greater Los Angeles area.
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