Q3 2023 LA Office Market Report
The Los Angeles office market continues to struggle as companies right-size. Leasing activity has maintained levels well below historical averages, coupled with smaller deals on a size-basis providing a double blow to the market. As prepandemic leases continue to roll, vacancy and net absorption are expected to continue to be negatively impacted. The good news for occupiers is that there is a generational opportunity for leverage as landlords become increasingly open to concessions. However, deal time and securing financing for tenant improvements will take longer.
Current net absorption vacancy numbers were negative 1.1 million square feet for the third quarter, wiping out the last quarter’s positive growth and returning the 12-month absorption down to negative 1.3 million square feet. Downtown LA has been hit particularly hard, contributing negative 665,000 square feet to the 12-month net absorption while other submarkets like West Los Angeles have been contributing positive absorption of 550,000 square feet in that same 12-month period. While many landlords continue to hold firm on rental rates, some submarkets are adjusting such as San Fernando which notched a correction from $3.34 to $3.19 per square foot representing a 2 percent decline from the previous quarter.
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