Los Angeles Office Market
Total vacancy increased slightly in the second quarter to 24.9%, while total availability decreased to 28.8% with reductions in both direct and sublet space. Vacancy and availability rates will not return to pre-pandemic averages until surplus (mostly commodity-grade) buildings are removed from the competitive inventory set. This is progressively happening in a handful of areas. Renewals and extensions continue to drive leasing activity, accounting for eight of the top ten leases in the second quarter. Tech and media companies are generally dormant and traditional industries, such as law firms, state and local government agencies, and professional services, are propelling current leasing activity. All industries are rightsizing to reduce costs.
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Leasing volume gradually declined through the first half of 2025, following a modest recovery in 2024. High rents, a tepid consumer spending outlook, and economic uncertainty driven by tariffs have hindered a robust leasing rebound. The market recorded 1.2 MSF in net absorption losses this quarter following a wave of 100 KSF+ move-outs that were concentrated in South Bay. Tenant departures, coupled with unleased new construction deliveries, pushed vacancy to 4.3%. Available sublease space rose 8.4% over the past three months, reaching 9.1 MSF. Infill contract for facilities with 24’+ clear heights fell 27.7% from nine quarters ago, a moderate decline given the 103.0% rent growth from early 2021 to late 2022. The construction pipeline shrank to 4.0 MSF, a 9.8% contraction from the first quarter. Of the 33 buildings under construction, only three have secured pre-leases.
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