Los Angeles Market Update: Vacancy Inching Up in January

Los Angeles’ office landscape continued its uncertain path to recovery. Vacancy for office properties in the metro was 13.5 percent as of January, up 30 basis points month-over-month, CommercialEdge data shows. Year-over-year, the figure was just 10 basis points lower. As several million square feet of new space came online last year, this difference highlights the metro’s relatively good position. Los Angeles’ office vacancy rate was 220 basis points lower than the U.S. figure.

There is confidence in the market, as listing rates continued to grow. At $41.62 as of January, the average was up by 8.1 percent year-over-year, well above the national growth rate of 1.2 percent.

The metro’s CBD recorded an increase of 250 basis points month-over-month, to 17.9 percent in January. Most urban submarkets had similar figures, as office users downsize their footprint, relocate or repurpose space. However, there is still hope from developers that some projects will re-ignite interest in these areas.

Brookfield Properties completed the final components of California Market Center last year, adding 1.5 million square feet of reimagined office space to the CBD. In January, it signed Adidas as the anchor tenant. The apparel manufacturer agreed to occupy the two top floors of the office buildings, totaling 107,000 square feet of space, including a 5,000-square-foot private deck.

Media production and creative office space continue to be among the city’s main drivers that weren’t as slowed down by crisis-induced trends. Burbank, for example, had one of the lowest vacancy rates, at 7.0 percent (up 30 basis points month-over-month). Other large submarkets that fared better than the metro average included San Gabriel Valley (up 70 basis points month-over-month, to 10.7 percent in January), Century City (down 10 basis points, to 11.1 percent), Central San Fernando Valley (down 210 basis points, to 11.1 percent), the Wilshire Corridor (up 50 bps, to 7.3 percent).

Compared to other gateway metros, Los Angeles managed to retain its spot just below Manhattan, which continued to have the lowest vacancy, at 12.8 percent as of January. San Francisco recorded 15.9 percent vacancy, while Chicago struggled the most as 19.6 percent of office space was vacant.

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