MARKET DRIVERS
The Los Angeles office market remains challenged by weak demand and headwinds within the local and macro economies. However, professional services firms, such as law firms and
financial institutions, are helping to stabilize occupancy, driven by return-to-office mandates. This has offset some of the demand decline from technology and entertainment companies, particularly in the Mid-Cities and Downtown LA submarkets. Both areas posted modestly positive net absorption in the first half of the year. Most leasing activity was driven by renewals, as companies continue to downsize and adopt hybrid work models.
ECONOMIC REVIEW
Los Angeles’s diverse population supports a broad labor force, helping sustain economic activity across key industries despite ongoing market challenges. Overall, the office market remains soft. Landlords are also bracing for potential federal government employment reductions, which could further impact occupancy. These policy changes carry both risks and potential upside, depending on how enforcement plays out and whether displaced workers transition into private sector roles.
NEAR-TERM OUTLOOK
New office towers are struggling to attract tenants. However, demand for top-tier Class A properties remains steady, driven by tenant demand for competitive offerings such as desirable onsite amenities, walkability to restaurants and retailers, economic concessions, and flexible lease terms. Landlords must continue to evaluate their strategies, such as redesigning spaces for hybrid work, renovating floor plans, and constructing move-in ready suites. Prime central submarkets show strong resilience, with year-over-year asking rents remaining mostly flat or rising slightly, and stable rental premiums. Downtown Los Angeles is showing early signs of recovery, though high vacancy rates and ongoing demolition of obsolete buildings continue to dampen broader momentum and development activity.
Click here to subscribe to Kidder Mathews market research.