One-Fifth of LA’s Office Space Is Still Vacant
Sublease space is at an all-time high
By Greg Cornfield April 7, 2022 7:00 pm
reprints
Office activity in Los Angeles stagnated through the first quarter of 2022, as nearly one-fifth of total inventory remained vacant, and rents were nearly unchanged compared to a year ago.
That’s according to the latest office market report from Newmark (NMRK), which shows approximately 452,549 square feet of positive net absorption in the first quarter. But vacancy for the 215 million-square-foot market was unchanged compared to the final quarter of 2021 at nearly 20 percent. That’s also an increase of two percentage points from the same period last year following more sublease space hitting the market.
Meanwhile, asking rents have frozen. The average rate was $3.67 per square foot per month after the first quarter this year, which is a penny cheaper than the previous quarter, and just two cents higher than the first quarter of 2021.
Additionally, the volume of space available for sublease increased by 745,000 square feet over the last three months to an all-time high of 9.7 million square feet, or 4.5 percent of the total inventory. That includes Farmers Insurance listing more than 580,000 square feet in the West Valley; Yahoo! offering 132,300 square feet in Playa Vista; and Sweetgreen listing 94,000 square feet in Culver City.
Century City was one of the bright spots as perhaps the best-performing submarket. It’s home to many of the top talent agencies, financiers and law firms that support the Hollywood entertainment machine. Its biggest lease during the quarter was Creative Artist Agency’s 400,000-square-foot deal following its landmark merger with ICM.
The other top leases for L.A. in the first quarter included Lionsgate Entertainment’s extension on its 192,584-square-foot headquarters; Nike’s 93,166-square-foot expansion in Playa Vista; the law firm Buchalter’s 87,217-square-foot renewal in Downtown L.A.; and Google (GOOGL)’s new 52,782-square-foot lease.
Newmark expects a busier spring for offices with companies implementing back-to-work policies and setting deadlines for those returns. That will be followed by new overall assessments for long-term office needs and for how companies might embrace a hybrid mix with remote working.
Entertainment and tech are expected to continue to propel the overall recovery while studio leasing and development show no signs of slowing down. Creative, collaborative spaces will still be in demand, as they were in the first quarter.
The top investment sales for the first quarter included Gemdale USA’s $93 million sale of a 75,600-square-foot Hollywood office that’s fully leased to Netflix (NFLX); and a venture paying $46.8 million for a 56,300-square-foot life sciences building within the Silicon Beach market.
Gregory Cornfield can be reached at gcornfield@commercialobserver.com.
