Los Angeles Office Market
Total vacancy (25.1%) and availability (29.4%) increased slightly this quarter by 10 and 40 bps, respectively. Trophy buildings are out-performing other asset classes. The segment generally appeals to companies due to its prime location, luxurious amenities, high-end design, and prestige factor, essentially acting as a statement of a company’s success and image. The latter is important to lure workers back to the office. Leasing activity was down year-over-year as economic concerns and hybrid work contain growth. Some industries, such as legal services who adopted early in-office attendance policies, are seeing stronger employment and leasing.
Download Los Angeles Office Market Report 1Q25Los Angeles Industrial Market
Leasing activity and the average weighted lease term have slowly increased since the start of 2024 after reaching cyclical lows by year-end 2023. Steep rents, tepid retail sales and geopolitically-induced economic uncertainty hinder a full market recovery. The market recorded 1.4 MSF in net absorption gains in the first quarter following 10 consecutive quarters of net occupancy losses. A slowdown in large tenant departures coincided with a wave of big-box move-ins. Vacancy remained flat at 4.1%. Sublet availability declined 7.1% over the last three months to reach 8.9 MSF. Infill start rents for 24’+ clear facilities were down 27.2% from eight quarters ago; not a severe drop when considering rents grew by 103.0% from early 2021 to late 2022. The construction pipeline shrank by 13.4% from the fourth quarter to total 4.2 MSF. None of the 33 buildings currently under construction have been pre-leased.
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