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Los Angeles Office Market Report

2nd Quarter 2021

Posted In — Market Research | Market Report

MARKET DRIVERS

LEASING ACTIVITY ramped up in the second quarter with over 3.8M SF leased, the highest since the pandemic began in the first half of 2020.

BECAUSE SUBLEASE availabilities are at all-time highs, the rate at which sublease space was hitting the market has dropped. 2Q21 reported 9.7M SF of available sublet space, over 100K SF lower than the quarter prior.

ASKING RATES decreased across the metro, concluding at $3.44/SF on a full-service basis. Many landlords have offered discounted rents and many concessions and incentives to lure or retain tenants. Asking rates for new sublet space have averaged $0.22/SF less than direct space.

KNOWN as a major tech hub, Silicon Beach received some major deals in the second quarter. Hulu, Snap, and Roku were some of the top deals with 344K SF, 145K SF, and 72K SF leased, respectively.

LOW INTEREST RATES and SBA programs have contributed to the increase in demand for purchase opportunities with 43 transactions completed. Tenants who made short-term solutions during the pandemic have applied their focus towards purchases in order to build equity. The average sale price in 2Q21 was $401.13/SF with cap rates settling at 5.6%.

ECONOMIC REVIEW

AS OF MAY, the unemployment rate in Los Angeles County remained unchanged at 11.1%.

COUNTYWIDE JOB LEVELS increased by 41,000 between April and May with the top sectors being leisure and hospitality (14,400), accommodation and food services (10,000), and educational and health services (7,700).

NEAR-TERM OUTLOOK

THE LOS ANGELES office market will be tested as availabilities remain at all-time highs. Direct asking lease rates are expected to hold steady, but landlords will continue to offer additional incentives to secure deals. With restrictions lifted, leasing activity is expected to increase moving forward as people return to work and tenants continue to reevaluate their space needs.

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