AS THE FALLOUT is addressed in various ways by office tenants, investors, and owners, the Greater Los Angeles office market is showing early signs of fragmented and slow recovery as businesses shed space at a slower pace in an apparent calculation that better times are ahead.
AFTER REPORTING NEGATIVE GAINS in 1Q 2022, direct net absorption reported positive in 2Q 2022 with 407K SF. The favorable increase in direct net absorption gains was due to tenants leasing space in previous quarters waiting for tenant improvements to be completed.
SUBLEASE AVAILABILITIES have increased slightly to over 9.8M SF in 2Q 2022, lifting it by 4.3% from 9.4M SF in 2Q 2021. Rent growth in West Los Angeles has been fueled by strong lease activity, with tech, media, and entertainment tenants signing large expansions and renewals.
DIRECT ASKING LEASE RATES increased in 2Q 2022, concluding at $3.51/SF on a full-service basis. Concessions have been reduced slightly, indicating that the economy is stabilizing as businesses shed less space in anticipation of better times ahead.
THE METRO’S EVER-EXPANDING MEDIA and film production space dominated 2021 deals, with tech and medical offices also seeing significant activity. Sales activity remained slightly lower than 2020 average. The average sale price in 2Q 2022 was $ 252.51/SF with cap rates at 5.2%.
AS OF MAY 2022, the unemployment rate increased 30 basis points (bps) from the month prior to 4.3%.
COUNTYWIDE JOB LEVELS increased by 9,700 between April and May with the subsectors of professional, scientific and technical services down 3,000 jobs.
CULVER CITY, which is home to Amazon Studios and Warner Bros. Discovery, is still Los Angeles’ hottest entertainment district. West Los Angeles has recovered faster than the rest of the county. The growing popularity of Century City, which is appealing due to its central location, as well as the presence of the Westfield Century City mall and the incipient Fairmont Century Plaza hotel, has contributed to West L.A.’s resurgence.
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