Projected job growth and rising business confidence levels are boding well for office demand. Strong demand has brought forth a fast rise to the asking rental rates in the class A office properties; we have seen about 18% growth in class A rental rates since January. As of July and August the market has experienced a cooling off due not only to fast rise in rents, but also due to the new Title 24 energy regulations (see other article herein). For the last year we’ve seen office vacancies fall from 13% to 11.8%, and Los Angeles employment growth has been 3.4%. The permanent job growth tends to be situated in the greatest pool of educated talent. Pasadena specifically has experienced the greatest job growth, which translates to a rise in occupancy and rental rates.
There has been a movement away from traditional office space and those buildings offering contemporary space for tech companies, product development, arts, and other media uses are seeing space absorbed the fastest. Technology and energy sectors have generated this growth within the local market and they continually lead the recovery throughout the United States as well. We anticipate further job growth through 2014 and 2015, which will drive office space absorption.
In the investment arena there is lots of capital chasing real estate. As an example of this within the past 18 months, there been 103 deals over $250 million dollars. Cap rates have fallen 46 basis points since January and the ability to leverage is back with 80% financing. We are continuing to see offshore capital moving into United States. Canada and Asia are the fastest growing segment of capital, with Europe close behind. United States continues to be a safe harbor of rules the investment and by comparison to other parts of the world attractive returns and price per square foot.
Looking back on the recent past and by comparison we are similar to the federal policies, interest rates, unemployment rate and bank leverages that we saw in 2004. By comparison to transaction velocity, available capital, real estate values and job growth we are similar to 2006 levels. Based upon these comparisons will continue to see optimism and expansion in the real estate market. The question is how long or how far the expansion will go. Some economists believe for another 3 years, but in our opinion for another year and a half. The memories of fear still remain in the minds of many, and as we proceed forward many do so with caution. At this point it's the large institutional capital that is pushing a Goldilocks mentality that is driving real estate rents and values.