Forecast anticipates occupancy losses to persist until at least 2025
By Ryan Patap
CoStar Analytics
Office leasing activity in Los Angeles remains tepid, foreshadowing rising vacancy and flat rents in the months ahead.
In the third quarter of 2024, office tenants signed an estimated 4.6 million square feet of leases — a similar leasing level to the past few years. Third-quarter activity represents around 85% of the average quarterly activity from 2017 through 2019, the three years leading up to the COVID-19 pandemic.
This level of tenant demand has been too low to keep vacancy levels in check. Office vacancy stands at 16.3%, the highest level in decades. The pain has been felt in almost all segments and locations of the Greater Los Angeles office market.
Looking at larger deal activity, in September, SoCalGas committed to moving its headquarters to 350 S. Grand Ave. in downtown Los Angeles in 2026, leasing just under 200,000 square feet in the market’s largest nonrenewal office lease inked this year. The new SoCalGas space will be around two-thirds the size of the company’s current office footprint at the nearby Gas Company Tower.
Also of note, in the third quarter, the Entrada development at 6181 W. Centinela Ave. saw office leases inked with the Trade Desk, Jazwares and Impact Networking. Construction on Entrada wrapped in 2022, and the property, which is adjacent to the Playa District, had sat vacant for years. With these deals, however, it’s around 45% leased.
The outlook for Los Angeles’ office market is sobering. With vacancy anticipated to rise even further during the next several years, CoStar expects that office rents will largely hold flat. Developers and investors will likely continue to show restraint in today’s environment.
(Posted with permission by CoStar)