Demand for larger offices in Los Angeles has soared, while interest in offices across the nation sags.
A spike in demand for L.A. work space in September was fueled by renters seeking offices larger than 50,000 square feet, the Commercial Observer reported, citing a quarterly study by VTS.
Office demand in Los Angeles is higher than at any time since June 2021. VTS’s demand index, known as VODI, measures demand through tenant searches.
Los Angeles is the exception, however, despite its record 26.6 percent office vacancy rate last spring, according to Savills. Office landlords face properties losing more than half their value.
The VTS report issued mixed results for other markets, including Boston, Chicago, New York, Seattle, San Francisco and Washington, D.C.
U.S. office demand has stabilized, but remains between half and two-thirds of tenant interest before the pandemic. National demand decreased 3.8 percent quarter-over-quarter, but rose 6.3 percent annually, according to the index.
“What the office market has experienced over the past two years is likely what we will see for the immediate future. Although it is showing signs of life amid persistent headwinds, it remains to be seen if the office market will continue to rebound further from pandemic lows,” VTS CEO Nick Romito said in a statement.
“Amidst a cooling job market, new demand for office space has remained fairly consistent over the last two years despite these headwinds, which is a positive indicator of resiliency,” he added.
Office demand in New York City, Boston and San Francisco has remained flat over the past two years, despite rising and falling monthly.
But office demand in Seattle fell 43.2 percent quarter-over-quarter, and 53.2 percent year-over-year, largely because of an “abnormal” three-month decline in tenants seeking offices of 50,000 square feet or more. Demand for spaces between 10,000 and 50,000 square feet rose in the third quarter, preventing an all-out crash.
Demand for offices in Chicago and in the nation’s capital has gradually declined over the past two years, according to the VTS report.
— Dana Bartholomew
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