MARKET DRIVERS
The Los Angeles office market remained stagnant through the third quarter, though select submarkets saw modest increases in leasing activity. Markets that underperformed were weighed down by ongoing vacancies brought on by substantial space reductions and sublease availability, along with contractions in the entertainment and IT sectors. Leasing activity was mainly driven by shorter-term renewals and a demand for new but less space. However, some occupiers are showing willingness to commit to longer-term leases, prompting landlords to offer more incentives to attract and retain tenants.
ECONOMIC REVIEW
Los Angeles’ diverse economy is primarily driven by the tourism, professional services, entertainment, and aerospace sectors. Los Angeles faces difficulties due to labor issues, population shifts, and migration, even with corporate advantages. Employment growth has slowed, and office-using industries showed little expansion. The slow recovery of major industries has dampened the demand for office space. Despite this, economic uncertainty influenced corporate real estate decisions.
NEAR-TERM OUTLOOK
The Los Angeles office market continues to favor tenants, characterized by high vacancy rates, limited demand, low absorption, and increased concessions. Vacancies are likely to continue to rise until 2026, but a quicker recovery is possible if demand rises and if inventory is reduced. There are plans for substantial demolition and conversion to residential activity, along with limited new construction. A recovery is possible if the overall economy stabilizes, workplace strategies change, and tenant demand increases.
3Q 2025 Los Angeles Office Market: Key Data Points
Explore our full Los Angeles office market review for deeper insights into leasing trends, sale activity, and submarket performance.
- Vacancy Rate Rises: Direct vacancy increased to 16.0%, up 70 basis points year-over-year.
- Asking Lease Rates Decline: Average asking lease rate fell to $3.50/SF full-service, a 1.41% decrease year-over-year.
- Leasing Activity Slows: Total leasing volume reached 2.88M SF, down 37.7% year-over-year.
- Net Absorption Negative: The market recorded -549K SF in net absorption for the quarter.
- No New Deliveries: No new office space was delivered in Q3 2025.
- Construction Pipeline Active: 2.8M SF remains under development across the region.
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