Los Angeles Office Market
Total vacancy (25.1%) and availability (29.0%) dropped slightly this quarter by 10 and 60 bps, respectively. Vacancy in trophy buildings is much lower than Class A, while trophy rents command a rent premium. Trophy product 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 moderate in 2024 but remained subdued compared to pre-pandemic years as hybrid work conditions and higher business operating costs weigh on office tenants. Most leases are expiration driven with tenants, on average, cutting their footprints by 15-20% when their leases come due.
Download Los Angeles Office Market Report 4Q24Los Angeles Industrial Market
Leasing activity and the average weighted lease term marginally rose over the past year after hitting cyclical lows at the end of 2023. Tenant demand remains depressed amid still-high rents, elevated business costs and lukewarm retail sales. Net absorption totaled -2.2 MSF in the fourth quarter, marking 10 consecutive quarters of net occupancy losses. Net absorption for the year was -10.9 MSF, the second-worst yearly showing on record after 2023. Sublet availability increased 6.1% over the last three months to reach 10.6 MSF. Class A infill start rents were down 33.9% from nine quarters ago. A drop, but not a severe one when considering rents grew by 112.6% from early 2021 to late 2022. The construction pipeline shrank by 17.1% from the third quarter to total 5.3 MSF. None of the 43 buildings currently under construction have been pre-leased.
Download Los Angeles Industrial Market Report 4Q24