Q2 2022 Commercial Real Estate Report: Los Angeles
Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.
Commercial real estate in Los Angeles, CA saw positive performance in Q2 2022 compared to Q1 2022.
Average commercial rents grew by about 3% since the first quarter of 2022 to about $34 per square foot per year, while the cost per square foot grew by 1.9% since the first quarter of 2022 to about $3,467 per square foot during Q2 2022.
The city’s industrial real estate market still favors landlords and office space leasing activity is up by about 48% since Q1.
General Market Trends
The second quarter of 2022 saw positive performance for commercial real estate in Los Angeles. Overall, average commercial rents grew by about 3%; the average cost per square foot grew by about 1.9%.
The industrial sector saw the strongest growth, with rents rising by about 4.4%. The office and retail sectors both saw modest growth of about 1%.
The hotel sector also saw notable growth with revenue per available room increasing from Q1 2022 by 8.4%.
Looking ahead to the rest of the year, we expect continued growth.
Vacancy Rates in Los Angeles, CA
The vacancy rate for office space in Los Angeles, CA was about 27% in Q2 of 2022, a slight increase from the previous quarter.
The average asking rent for office space was $3.25 per square foot, a slight increase from the previous quarter.
The vacancy rate for retail space in Los Angeles, CA sat tight at about 5.1% in Q2 of 2022, about the same as it was in Q1 2022.
The average asking rent for retail space was about $3.21 per square foot, an increase from the previous quarter.
Notable Commercial Real Estate Activity in Los Angeles, CA
In recent years, there’s been some notable commercial real estate activity in Los Angeles, CA.
These include the following:
- In 2019, Facebook leased about 260,000 square feet of office space in Playa Vista.
- In 2020, Amazon leased 430,000 square feet of office space in downtown Los Angeles.
- In 2021, Blizzard Entertainment dumped its HQ in Santa Monica in search of more affordable space after laying off 190 of its employees.
These are among some of the most notable.
The Status of Residential Rents in Los Angeles
In the second quarter of 2022, residential rents in Los Angeles continued to grow. The average rental rate for a one-bedroom apartment increased by 4.2% from about $2,100 to about $2,188.
The market forecast for the rest of 2022 is positive, with continued growth in both commercial and residential rents.
Los Angeles Q2 2022 Multifamily Performance
Los Angeles’s multifamily market had a strong second quarter, with rents growing and the average cost per square foot increasing.
Class A multifamily properties in Los Angeles saw a decrease in vacancy rates down to about 7.6%
Class B and C multifamily properties are sitting at a vacancy rate of about 3%.
The market is expected to continue to be strong in the second half of the year, with more growth in rents and the average cost per square foot.
Multifamily Construction and Volume in Los Angeles
Los Angeles had the second-highest multifamily construction volume in Q2 of 2022.
In terms of year-over-year growth, Los Angeles led the nation with a 13% increase in multifamily starts.
This is due in part to the strong job market in Los Angeles, which is attracting new residents and renters to the area.
Los Angeles Retail Sector Sale Transaction Performance
Retail space purchasing volume in Los Angeles sits at about 7 million square feet year-to-date; leasing volume is just below 5 million in the same time period.
Some of the top sales transactions in Q2 2022 include:
- Magnum Real Estate Group’s purchase of about 87,000 square feet of retail space on Obama Blvd in South Los Angeles for $37 million.
- YVF Investment Corporation’s purchase of about 45,000 square feet of retail space on Garvey Ave in Eastern SGV for about $18 million.
- Corbin South, LLC’s purchase of about 28,000 square feet of retail space on Corbin Ave in Western SFV for about $16 million.
Average sale price for retail space in Los Angeles is about $350 per square foot.
Los Angeles Industrial Real Estate Performance
Los Angeles’s industrial real estate market continued to strengthen in the second quarter of 2022, with average asking rents rising 4.4% to $11.32 per square foot and the average cost per square foot climbing 3.2% to $181.62.
The vacancy rate fell slightly to 2.7%, while the average lease term remained unchanged at 3.5 years.
The robust activity in the industrial sector was driven by e-commerce and logistics companies, which have been looking to capitalize on the region’s vast consumer base and dense population density.
Looking ahead, we expect commercial rents to continue to grow at a moderate pace in the second half of 2022, as businesses expand and relocate to Los Angeles in search of lower costs and greater access to customers.
Los Angeles Hotel Sector Performance
According to data from the Los Angeles Tourism & Convention Board, hotel sector performance in Los Angeles was strong in Q2 2022.
Hotel occupancy rates averaged 82.3%, up 4.6% from Q2 2021.
Average daily room rates increased 3.7% to $196.74, and revenue per available room (RevPAR) grew 8.4% to $161.17.
Takeaways for Los Angeles Commercial Real Estate Investors
Los Angeles’s positive market performance in Q2 2022 may see some moderation in the coming quarters among inflationary pressures and rising interest rates. Nonetheless:
- Los Angeles commercial rents grew in the second quarter of 2022.
- The average cost per square foot of commercial real estate in Los Angeles increased in the second quarter of 2022.
- The market forecast for the rest of 2022 is positive for Los Angeles commercial real estate investors.
- Los Angeles is a desirable market for commercial real estate investors due to its strong economy and population growth.
Always do your research, stay diligent, and happy investing.
Methodology
All figures presented in this article are based on MyEListing.com’s commercial real estate listing data in corroboration with other freely available data and information covering the commercial real estate industry.
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