MARKET DRIVERS
The Los Angeles office market continues to face headwinds, with leasing activity in the first quarter of 2026 remaining relatively flat. The Class A direct vacancy rate held steady at 20.6%.
Many companies remain hesitant to mandate a full return to the office. As a result, remote and hybrid work models persist, prompting businesses to reassess their space needs and, in many cases, reduce their overall footprint. Net absorption trends continue to reflect this structural shift in tenant demand.
Despite these challenges, select sectors are driving activity. Healthcare-related occupiers, along with new media companies, including streamers and podcasting firms, are showing increased demand for office and production space.
ECONOMIC REVIEW
Los Angeles maintains a large and diverse economic base, although key sectors such as technology and entertainment are currently underperforming. Ongoing company consolidation and the outsourcing of production by legacy media firms continue to put pressure on historically strong submarkets, including Burbank and Hollywood.
The labor market faces significant challenges, including net outmigration during 2025, slow employment growth, and high cost-of-living expenses, all of which impact office demand. Leasing activity remains limited, particularly for large blocks of space.
In higher-vacancy submarkets, landlords continue to offer generous concession packages, including tenant improvement allowances and rent abatement, in lieu of reducing rents. Despite these headwinds, the metro area’s Class A average asking rent, at $3.53 SF on a full-service basis, has remained impressively stable.
NEAR-TERM OUTLOOK
The Los Angeles office market shows limited but emerging signs of stabilization, though overall sentiment remains cautious. Vacancy is expected to remain elevated and rent growth constrained through at least mid-2027.
1Q 2026 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 Remains Elevated but Stable: Los Angeles office vacancy held at 15.9% in 1Q 2026, unchanged from the prior quarter, reflecting a slow but stabilizing leasing environment.
- Asking Rents Hold Firm: Average direct full-service asking rents reached $3.53 PSF per month, essentially flat year-over-year despite ongoing market pressures.
- Negative Net Absorption Persists: Net absorption totaled –143,402 SF in 1Q 2026 as many tenants continue to downsize footprints amid hybrid work adoption.
- Leasing Activity Slows: Total leasing activity declined to 3.4M SF, down nearly 32% year-over-year, driven by fewer large-block lease transactions.
- Limited Construction Pipeline: Approximately 2.63M SFremains under development, keeping new supply constrained and helping prevent further vacancy escalation.
Click here to subscribe to Kidder Mathews market research.