Los Angeles County office leasing falls 28% in the fourth quarter

Availability hits record high, but rent rates increase as trophy properties enter market

LA County Office Leasing Falls 28% in the Fourth Quarter
(Illustration by Kevin Rebong for The Real Deal)

Would-be tenants for offices in Los Angeles County seem to have scurried out of the market.

Landlords across the county saw leasing fall 28 percent to 2.2 million square feet in the fourth quarter, down from 3 million square feet in the prior period, the Commercial Observer reported, citing new figures from Savills. 

Office leasing in the three months ending in December plunged 26 percent from the same period a year earlier.

“Discretionary leasing has largely remained on the sidelines in 2023 as the majority of deals continue to be largely expiration-driven,” Savills said in the report. “Although, with the Hollywood strikes over … there is cautious optimism that leasing activity will increase in 2024.”

Leasing activity last year was 10.5 million square feet, down 15 percent from 2022, and down 42 percent from 18 million square feet in 2019, before the pandemic sparked a shift to remote work.

L.A.’s office availability rate, or the sum of vacant space and soon-to-expire leases, is close to 27 percent, a record high, according to Savills.

Downtown L.A.’s availability rate is up to 29.7 percent. Glendale, Culver City, El Segundo and the Miracle Mile have availability rates above 30 percent.

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The overall average asking rental rate is $3.93 per square foot per month, up 2.1 percent from a year ago as continued new speculative office development and higher-priced trophy space becomes available, Savills reported. 

Century City is the most expensive office submarket in the region at $6.83 per square foot, the only real estate submarket above $6. Beverly Hills priced in at $5.92 per square foot; Santa Monica is at $5.83; and West Hollywood is at $5.70 per square foot.

Potential interest rate cuts by the Federal Reserve could usher in a wave of dealmaking, according to the Observer, especially as tech firms and AI companies become active again. 

Last quarter, the biggest leases included L.A. County’s 207,300-square-foot lease in Long Beach in a 15-year deal valued at $166.7 million, followed by law firm Sheppard Mullin’s 118,200-square-foot lease in Downtown L.A. for undisclosed terms.

Law firm Sidley Austin’s 66,600-square-foot extension at 1999 Avenue of the Stars was the third-largest of the quarter.

The County of L.A. also signed a 50,756-square-foot lease renewal at 3179 Temple Avenue in San Gabriel Valley, as well as a new 41,040-square-foot lease on Sunset Boulevard in Hollywood. 

— Dana Bartholomew

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