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The Los Angeles office market had a mixed year in 2021, with the vacancy rate increasing but asking rents holding steady. The bright spot was a nearly 127 percent rise in net absorption, a bounceback from the first months of the pandemic that put the market back in positive territory.
The fourth-quarter vacancy rate was 19.4 percent — up 16.2 percent year-on-year, but flat from the previous quarter. Average annual asking rent held steady at $44 per square foot.
But that citywide figure was pulled up by a single submarket — the Westside — where the average was $67.56. Of all the city’s major office submarkets, only Downtown Los Angeles had an asking rent matching the overall average.
West Los Angeles has proven particularly attractive to the technology, streaming and video game companies that accounted for much of the recent leasing activity.
About 4.3 percent of existing inventory was available for sublease at the end of the year, an increase over the third-quarter figure, due largely to DirecTV’s plans to sublease over 500,000 square feet of office space at its headquarters in El Segundo — about 80 percent of its current footprint.
Among office developers, there seemed to be an air of pessimism, with deliveries down 38.9 percent in 2021 year-over-year, and projects under construction dropping by more than 26 percent.
Just as the pandemic pressured the office sector, it sparked a surge in the industrial market, leading some developers to buy up office buildings in order to convert them into warehouse facilities. It’s a nationwide trend, but the Los Angeles area is particularly affected because it has one of the widest gaps in the country between the vacancy rates of its office sector (19.4 percent) and its industrial sector (1.2 percent), according to a report from Newmark.