Downtown Los Angeles is rapidly evolving into an area with residences, workplaces and restaurants, and has a boom in multifamily construction underway. Many are hoping the office market’s fortunes are finally shifting. On the metric of availability, however, the office sector still faces some challenges.
The current availability rate in Downtown Los Angeles is 17.6%. This is well above the market’s overall rate of 13.0%. Downtown availability has remained above 16% since early 2013.
Drilling down into the largest towers in the downtown Los Angeles area provides a picture on the current state of its high-rise market. The 14 largest office buildings in the area account for 25% of overall office stock and almost 40% of the neighborhood’s higher-end buildings. The availability rate for these 14 buildings combined, at 23.4%. This is significantly greater than both the area and the overall Los Angeles vacancy rates.
There is a significant spread in availability by building, as the graph below shows. A few assets currently have availability lower than the downtown market average. Most buildings are struggling with elevated availability levels. Even large tenants looking to locate downtown have plenty of options.
Little evidence exists that the greatly improved retail and multifamily environment in downtown has significantly changed. This is seen in leasing in the more traditional office towers in the city’s Bunker Hill and Financial District. Technology and media industry tenants often are less attracted to those more traditional office buildings.
There have been some moves into these properties from tech and media tenants. ARUP move from Playa Vista to Wilshire Grand and Evite coming from West Hollywood to 6 Wilshire are examples. This does not yet imply a mass migration from other parts of Los Angeles. This is not for a lack of trying. There are large capital improvement projects underway or already completed in many of greater downtown’s largest office towers.
Conversely, the largest beneficiary within the office sector of downtown’s gentrification has been redevelopment. This is seen in projects in the Arts District, where Warner Music has committed to over 250,000 square feet and where Spotify, Honey.com, TubeScience and Ghost Management have each committed to spaces over 100,000 square feet. This area has proven its ability to attract tech and creative firms that historically have clustered in creative office spaces on Los Angeles’ Westside.