Office vacancies in Downtown Long Beach have hit their highest point in 20 years, with nearly a quarter of its offices empty.
Even with office rental rates lower than in other nearby cities, Downtown Long Beach had a vacancy rate of 22.4 percent last quarter, the Long Beach Business Journal reported, citing a new study.
A shift toward remote work outside the office played a major role in the growing number of vacancies, with small businesses slowly starting to move out of their spaces, according to a report by the Downtown Long Beach Alliance and public policy analyst Morris Mills.
“[For] an office of about eight or 10 people, it might not be in their budget or there is no reason for them to keep paying rent,” Mills said. “So they are corroding away like that.”
Vacancies in some of Downtown’s biggest Class A buildings — Landmark Square, One World Trade Center and Shoreline Square Tower — contributed to a decline that began with the dawn of the pandemic in early 2020.
The total occupancy rate of those three properties dropped from an average of 74 percent in the second quarter of 2021 to 66 percent last quarter.
Looking ahead, the Downtown Long Beach Alliance expects even more businesses will shrink their office footprints.
At the same time, the occupancy rate for older Class C buildings rose to 89 percent last quarter, from 83 percent in the second quarter of last year. Mills said the lower price may make older buildings more attractive.
Even with the spike in Downtown vacancies, the average asking rent per square foot increased by 3.6 percent to $2.56, with the primary culprit being inflation, according to Mills. The cost of operations for office buildings, from maintenance workers to air conditioning, has boosted rents as demand falters.
More than a quarter of all the office space in Los Angeles County was available for lease or sublease in the first quarter of this year, up nearly a full percentage point from the fourth quarter of 2021, according to Savills.
The San Gabriel Valley was the tightest office market across L.A. County in the first quarter, with a vacancy rate of 13 percent.
Meanwhile, tech and streaming companies are ratcheting back their office presence in Silicon Beach, as both industries struggle with declining stock prices, hiring freezes and remote work.
– Dana Bartholomew