Los Angeles Office Market
Total vacancy, which has hovered in the 24-25% range over the last 18 months, settled at 25.2%. Owner-user sales and conversions are tempering vacancy. Sublet availability dropped by over 1.2-MSF during the third quarter, resulting in the lowest amount of space in the market since 2020. Traditional industries (e.g., law and finance firms) comprise the bulk of today’s leasing activity. Most are rightsizing, with Fortune-tier companies pursuing trophy space. Industry restructuring is ongoing for media and tech, leading to sluggish leasing. Lease term lengths are increasing amid flat office utilization, suggesting most companies have a grasp on their long-term space needs. Trophy product continues to outperform, with a 14.5% vacancy.
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Los Angeles Industrial Market
Leasing volume trended upward for the second-straight quarter. Healthy consumer spending and plateauing rents have incentivized space commitments by current and prospective occupiers. Class A product has been increasingly pursued. 2.2 MSF in net absorption gains occurred this quarter after a surge in new big-box leases translated into a wave of move-ins. Available sublease space rose 4.8% over the past three months, reaching 9.4 MSF. Infill contract rents for facilities with 24’+ clear heights fell 27.8% from ten quarters ago, a moderate decline given the 103.0% rent growth from early 2021 to late 2022. Concessions, meanwhile, are substantially up. Lease term lengths are gradually rising as tenants lock in favorable conditions.
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