LA Office Leasing Goes Cold for the Winter
Report: L.A. signed 12.3 million square feet in office leases in 2022
By Greg Cornfield January 3, 2023 3:40 pm
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Greater Los Angeles’ office market slowed by almost all leasing measures at the end of 2022, while the total availability rate hit another record high, according to a report released Tuesday.
Overall leasing activity accounted for just 2.9 million square feet in the fourth quarter, down from the 3.1 million square feet reported in the previous quarter, and down 19 percent from the 3.6 million square feet reported for the same period a year ago, according to Savills. In total, 2022 saw leasing activity of 12.3 million square feet, about 3 percent higher than in 2021, but still down 32 percent from the 18 million square feet reported in 2019 before the COVID-19 pandemic.
“With continued uncertainty about a slowdown in the overall economy, a pullback in hiring in the technology sector, and hybrid workplace policies which are now here to stay, expect office space demand to remain lower going into 2023 despite a labor market that is still tight,” Savills’ report read.
The overall average asking rent and the Class A rate each dropped a penny to $3.85 per square foot and $4.05 per square foot, respectively. At the same time, total office availability increased again to 26 percent while available sublease space increased to a record high 10.3 million square feet, up from 7.8 million square feet a year ago. In the fourth quarter, Healthnet put 218,326 square feet on the sublease market in Woodland Hills, and Harbor Freight Tools put 71,170 square feet on the market in Calabasas.
Savills also reported differences in the types of tenants signing leases in the fourth quarter compared to in years past. Instead of an office market “dominated by fast-growing technology firms and entertainment/media companies,” it’s now mostly renewals and a generally broader tenant base.
“Los Angeles’ office market will be even more of a tenant-favorable market as demand is forecasted to remain low going into 2023,” the report said.
Western Asset Management’s 184,581-square-foot renewal with Irvine Company at 385 East Colorado Boulevard in Pasadena was the largest lease signed in Greater L.A. in the fourth quarter. Advanced Bionics, which develops cochlear implant systems, signed a renewal for 116,444 square feet in Santa Clarita for the second-largest.
Gregory Cornfield can be reached at gcornfield@commercialobserver.com.
