Study: LA County Office Vacancy Rises to 16.5% in Hybrid Work Era

Los Angeles office cubicles struggle to find occupants, while the market’s warehouses are crammed with e-commerce goods.

The vacancy rate for L.A. County offices rose to 16.5 percent in the third quarter, while warehouse vacancies fell to 0.9 percent since early 2020, the Los Angeles Daily News reported, citing a study by Beacon Economics.

Office vacancies in Los Angeles and beyond are a result of businesses shedding offices as more people work hybrid or remote schedules since the pandemic, according to the regional outlook report.

The 16.5 percent office vacancy rate last fall represents a 2.3 percent increase from the first quarter of 2020 and is the highest level in more than 20 years.

Nearly 21 percent of county residents work from home — nearly four times the pre-pandemic average, according to estimates from the U.S. Census Bureau’s most recent American Community Survey.

Use of available office space in the county has fallen by 1.8 million square feet, despite a 1.8-percent office employment uptick since February 2020, according to the Beacon report. That suggests employers are whittling down office operations and boosting accommodations for hybrid work.

“As returning employees work fewer days in the office and remote/hybrid work becomes increasingly utilized, the demand for floor space has declined across Los Angeles,” Beacon said. “This trend is expected to continue.”

While traditional business districts with highrise cubicles struggle to find tenants, technology hubs in such areas as West Los Angeles and Culver City are bouncing back, the study said.

At the same time, the county’s distribution warehouse vacancy rate was 0.9 percent last fall, a 4.8 percent decrease from the first quarter of 2020. The decline occurred despite 8.4 million square feet of new warehouses.

“The rapid growth in warehouse and distribution activity will begin to cool off and settle,” the report concludes. “However, the outlook for office is mixed.”

Businesses in Los Angeles and across the state have expanded their hybrid and work-from-home options in a move led by tech companies at the dawn of the pandemic in 2020.

In late 2021, 3M announced a new “Work Your Way” to allow workers to create a schedule that helps them work when and where they can. The company operates a manufacturing plant in Northridge and has offices in Los Angeles, Ontario, Monrovia, Pasadena and Canoga Park.

“It is about getting your work done and delivering results,” Aman Gupta, 3M’s vice president of enterprise workplace strategy, told the Daily News. “Not about where you sit and what time you logged on.”

More than 25 percent of office square footage in L.A. was available for lease in the third quarter — up 30 basis points from the prior quarter, according to a Savills report. By comparison, 18 percent of office space was available for lease in the fourth quarter of 2019.

Despite the increase in availability, L.A. office landlords don’t seem willing to budge much on rents. Average asking rents in the third quarter were $3.86 per square foot a month, compared to about $3.87 in the second quarter.

— Dana Bartholomew