LA Office Development Stalls in Q2

At the end of the second quarter, Los Angeles had 3 million square feet of office space under construction, representing 1.0 percent of total stock, CommercialEdge data shows. Development activity slowed down in the metro, with the pipeline experiencing little change since the first quarter. Just over 60,000 square feet of office space broke ground in the second quarter.

The office development rate was less than half the national figure, at 2.2 percent as of June. Los Angeles also lagged other gateway markets, with Miami taking the lead at 7.5 percent of stock underway (5.6 million square feet), followed by Manhattan at 4.3 percent (20.7 million square feet); the Bay Area with 3.8 percent (7.8 million square feet) and San Francisco at 2.7 percent (4.3 million square feet). Chicago trailed Los Angeles with only 0.8 percent of stock under construction (2.4 million square feet).

Together with planned and prospective developments, Los Angeles’ pipeline reached 3.7 percent of stock in June, still lower than most metros tracked by CommercialEdge. Activity was on a downward trend since the beginning of the year, as the rise of hybrid and remote work impacted vacancy and demand for ‘traditional’ office space.

Focus on creative office construction persists

Los Angeles’ office development pipeline contains some large redevelopments, such as the $300 million LUMEN West LA, under construction by Northwood Investors and McCarthy Cook, in the West Los Angeles submarket. The 575,00-square-foot project is expected to finalize in the second half of the year.

The metro’s creative economy is a major driver of office construction as well, with several large developers expanding their footprint of support space for film, television and other media production. In May, Sylmar Studios broke ground on a $500 million production facility in Northeast San Fernando Valley. The project is set to include 12 sound stages and 120,000 square feet of supporting office space.

Another creative office project is set to take shape in the Arts District, at 411 S. Hewitt St. The Legendary Group announced a 350,000-square-foot speculative project designed by Gensler. The 17-story tower called Above will also include 22,000 square feet of production space, along with retail and three levels of subterranean parking.

Three office properties were completed during the second quarter in metro Los Angeles, totaling 161,600 square feet. The largest of these was the 82,900-square-foot Garland Building in the metro’s CBD. The building’s private owner hired Omgivning to redevelop the historic building, which now includes flexible office space, retail and restaurant space.