Q4 2022 Office Space Report: Los Angeles, CA
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.
Los Angeles houses many company headquarters, including those of Walt Disney Company, Molina Healthcare, and Edison International, among others.
The population in Los Angeles reached 12.48 million in 2022. The unemployment rate in the city reached 4.4% in Q4 2022.
Vacancy rates, net absorption, and asking rental rates all increased quarter-over-quarter for Los Angeles office space.
General Area Overview & Demographics
According to the 2010 US Census, 44% of Los Angeles residents identify as Hispanic or Latino, and 28% identify as White. Additionally, African Americans make up 10% of the population, Asians 11%, and Native Americans and Pacific Islanders 1%.
Los Angeles, CA Median Household Income & Population
Los Angeles’ median household income is $64,800 per year according to a census report in 2018.
The median age in Los Angeles is 35 years old, according to the US Census Bureau’s 2018 American Community Survey. The city has a large population of young adults between the ages of 20 and 34 – comprising over one-third of its total population – while only 11% are 65 or older. Additionally, nearly one-quarter of the population is under 18.
A wealth of higher education institutions, boasting more than 40 colleges and universities are located in the city. The University of California, Los Angeles (UCLA) and the University of Southern California (USC) are two of the most renowned schools in the area.
Universal Studios Hollywood amusement park, the Hollywood Walk of Fame, the Grammy Museum, and Griffith Observatory are popular attractions in Los Angeles. The city also offers hiking in nearby canyons and a beachfront boardwalk.
Los Angeles has a Mediterranean-style climate characterized by mild, wet winters and dry, hot summers. The average temperature is generally between 70 and 85 degrees Fahrenheit throughout the year. Rainfall typically occurs during the winter months, with occasional showers during the summer.
Summary of Los Angeles Office Space Performance in Q4 2022
Vacancies for Los Angeles office space rose to about 19% in Q4 2022. East Downtown had the highest vacancy rate at 51.1%, while the Mid-Counties submarket had a 7.8% vacancy rate.
Vacancy square footage reached 45.8 million square feet in the quarter. Net absorption was negative at -454,856 square feet, bringing the year-to-date total to -667,401 square feet.
What are office space rents like in Los Angeles?
The full-service, gross average rental rate for Los Angeles office space reached an historic high at $3.86 per square foot in Q4 2022. This was a slight increase over Q3 2022’s numbers.
The highest asking rate was in the Century City submarket in South Bay at $6.57 per square foot for Class A property.
Purchase & Leasing Activity
Q4 2022 saw nearly 200 million square feet of Los Angeles office space sold for an average of $375 per square foot.
Leasing activity reached 3.5 million square feet in the quarter.
West Los Angeles saw much in the way of leasing volume at 947,691 square feet in Q4 2022. San Gabriel Valley’s leasing activity was among the lowest in the city at 84,035 square feet leased.
Notable Office Space Deals in Los Angeles in Q4 2022
There were several notable office space deals that took place for Los Angeles’ office space market in Q4 2022:
- Western Asset Management renewed their lease of 184,581 square feet in the Pasadena submarket.
- Advanced Bionics renewed their lease of 116,444 square feet in the San Fernando Valley and Ventura County submarket.
- Chemical Guys leased 70,393 square feet in the South Bay submarket.
- Buzzfeed renewed their lease of 65,000 square feet in the Hollywood/Mid-Wilshire submarket.
These are select examples among other activity.
New Office Space Development Activity in Los Angeles in Q4 2022
773,974 square feet of new deliveries were added to Los Angeles’ office space market in Q4 2022.
New deliveries year-to-date amounted to just above one million square feet.
There were 2,057,652 square feet of office space under construction in Los Angeles at the end of 2022.
Market Forecast for Los Angeles’ Office Space Market
The office space market in Los Angeles is slowly recovering from previous years’ poor performance.
Vacancy rates and net absorption were trending positively quarter-over-quarter at the end of the year.
Asking lease rates also increased from the previous quarter and are projected to remain level in 2023.
Takeaways for Office Space Investors
Vacancy rates for office space are expected to remain high in 2023. Potential economic distress as well as increases in real estate taxes and interest rates will put strain on current and potential office tenants.
With these setbacks, entry into Los Angeles’ office space sector may be optimal for buyers looking to take advantage of a lull in the market.
Do your research, stay diligent, and happy investing.
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