Office subleasing picks up in LA, tops new listings in Q3

Firms in Los Angeles are starting to sign more sublease deals, a trend that’s begun to chip away at a stubbornly high overall vacancy rate.

Sublease activity outpaced new listings for offices for the first time since the start of the pandemic, according to a quarterly report from Newmark. Around 81,400 square feet more space was subleased from July through September compared with the second quarter.

Sublet availability ticked down less than a half a percent to 4.3 percent in the third quarter compared with the prior period. The sublease segment currently totals about 9.1 million square feet in Los Angeles.

Activision Blizzard signed the largest sublease deal in the third quarter, taking 87,800 square feet of space for one of its subsidiaries at LPC West’s Pen Factory in Santa Monica.

West Los Angeles had the most sublease space on the market last quarter, with 3.5 million square feet. The area — which spans from Hollywood to Culver City to Marina del Rey — also led the increase in subleasing activity, with 180,000 square feet taken off the market.

Subleasing office space is generally cheaper than signing a lease outright. DirecTV, which is offering more than 500,000 square feet of sublease space in El Segundo, is asking $2.95 per square foot per month, though its former parent company was paying base rents of $3.39 per square foot.

Though subleasing activity offers a positive note on the market, the overall office vacancy rates across Los Angeles County are at a 10-year high.