Q1 2023 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, known as a global hub for arts and entertainment, houses several major companies, including entertainment powerhouses like The Walt Disney Company, Warner Bros. Entertainment, and Universal Pictures, as well as prominent technology companies such as SpaceX, Snap Inc., and Riot Games.
The unemployment rate in the city reached 5.2% in Q1 2023, about 80 basis points higher than Q4 2022’s rate and approximately 110 basis points above Q3’s rate.
Los Angeles’s office space market continued to experience lag across several metrics in Q1 2023.
General Area Overview & Demographics
Los Angeles, often referred to as LA, is a vibrant and diverse city located in Southern California. As the largest city in California and the second-largest city in the United States, it is a major economic and cultural hub. Known for its sunny weather, beautiful beaches, and iconic landmarks, LA attracts millions of residents and tourists alike.
Los Angeles’ Economy, Population, & Demographic Makeup
Demographically, Los Angeles is a melting pot of various ethnicities and cultures. The city’s population is incredibly diverse, with residents from all over the world. According to the latest available data, as of 2021, the estimated population of Los Angeles is over 4 million people. The city’s population is constantly growing, driven by a combination of natural increase and immigration.
One of the defining characteristics of Los Angeles is its multicultural nature. People of Hispanic or Latino origin make up a significant portion of the population, accounting for around 49% of the city’s residents. Additionally, Los Angeles is home to large communities of Asian, African American, and European descent.
The city’s economy is diverse and dynamic, with key sectors including entertainment, tourism, technology, finance, and international trade. Hollywood, located in the heart of LA, is the epicenter of the global entertainment industry, making the city a prominent center for film, television, and music production.
Geographically, Los Angeles is expansive, covering an area of over 500 square miles. It is surrounded by beautiful natural landscapes, such as the Pacific Ocean to the west and the San Gabriel Mountains to the north. The city comprises numerous neighborhoods and districts, each with its distinct character and atmosphere.
Los Angeles is also known for its extensive transportation network, although traffic congestion can be a challenge. The city is served by a network of freeways, major roads, and public transportation systems, including buses and a metro rail system.
In terms of cultural attractions, Los Angeles offers a wide range of options. From world-class museums like the Getty Center and the Los Angeles County Museum of Art to iconic landmarks like the Hollywood Sign and the Griffith Observatory, there is something for everyone.
Summary of Los Angeles’ Office Space Performance in Q1 2023
Overall vacancies for Los Angeles office space reached 20.0% in Q1 2023, a 0.8% increase quarter-over-quarter. The East Downtown submarket saw the highest vacancies at nearly 51%.
Net absorption for Los Angeles offices space decreased quarterly down to -1.2 million square feet.
What are office space rents like in Los Angeles?
Direct asking rents for Los Angeles office space dipped slightly to $41.04 per square foot in Q1 2023. Average rental rates were highest in West LA at $54.85 per square foot.
The East LA submarket posted the lowest average rental rate for the quarter at $23.46.
Purchase & Leasing Activity
Sales volume for Los Angeles office space ended up at approximately $539 million in Q1 2023, a 72.1% decrease year-over-year. The average sales prices per square foot landed at about $220.
Greater Los Angeles experienced 2.2 million square feet in leasing activity in Q1 2023, a 36.1% decrease from the previous quarter.
Notable Office Space Deals in Los Angeles in Q1 2023
There were several notable deals that took place for Los Angeles office space in Q1 2023:
- Sony Pictures began a new lease of 218,506 square feet at 5750 Wilshire Blvd.
- The county of Los Angeles began a new lease of 87,984 square feet at 611 N Brand Blvd.
- Waterbridge Capital purchased property at 445 S Figueroa St. for $111 million at $158 per square foot.
- Elat Properties purchased property at 801 S Grand Ave. for $47 million at $218 per square foot.
These are select examples among other activity.
New Office Space Development Activity in Los Angeles in Q1 2023
About 3.6 million square feet of new office space were under construction in Q1 2023 across 29 properties.
About 501,562 square feet were delivered in the quarter, with West LA providing the majority of that space.
Market Forecast for Los Angeles’ Office Space Market
Los Angeles’ office space market has continued to trend downward across several metrics and will likely continue to do so as 2023 progresses.
Current economic conditions are causing landlords to drop rents and offer more lease concessions to prevent existing tenants from migrating to higher-quality spaces at more competitive prices.
Takeaways for Office Space Investors
Investors in Los Angeles’ office space market should consider offering competitive leasing terms and conditions for lower-quality spaces or look to renovate as tenants demand updated amenities. Investors should also consider the sector’s low occupancy levels.
Do your research, stay diligent, and happy investing.
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