LA Office Availability Reaches Another High as Demand Craters
Volume of sublease space jumps 20 percent since last summer, report says
This likely isn’t the first time and likely won’t be the last time you read this: Los Angeles has again set a new high for available office space.
Office availability grew 40 basis points to 26.6 percent at the halfway point in 2023, according to a new report from Savills. That’s the highest availability rate ever reported in the Greater L.A. market while demand remains lower than before the pandemic.
Helping to raise that availability rate, the L.A. area’s sublease market increased yet again, to 10.8 million square feet, up 400,000 square feet from last quarter, and up 20 percent from the 9 million square feet reported this time last year. That’s still not even 5 percent of the 221 million square feet in the overall office market, but big-name tenants are putting unused space up for grabs.
For example, Google (GOOGL) is marketing 98,000 square feet for sublease at The Bluffs office complex in Playa Vista, according to CoStar. Comcast also secured a sublease tenant in The Switch, a production services company, for a 66,700-square-foot property on the Glendale-Burbank border.
Greater L.A. also reported lower office leasing activity with 2.4 million square feet in the second quarter. That number is down 15 percent from last quarter, and down 12 percent from the second quarter of 2022.
Savills expects availability to continue to rise, and the report anticipates more distress in the second half of the year and into next year as leasing activity remains below pre-pandemic levels.
Surprisingly, the overall average asking rental rate in L.A. ticked up to $3.84 per square foot per month, but remains slightly lower than the $3.87 average reported last year.
Eastern Los Angeles Regional Center signed the largest recorded office deal in the second quarter, adding 23,345 square feet to its nearly 150,000-square-foot space at The Alhambra. The rest of the top tenant transactions were mostly renewals. Team One renewed its 76,230-square-foot lease at Worthe Real Estate Group’s property at The Reserve campus in Playa Vista, and Lumen Technologies renewed its 67,632-square-foot lease at Gaw Capital’s 818 Plaza in Downtown L.A.
Additionally, the law firm Sidley Austin signed a 57,148-square-foot relocation lease at 350 South Grand Avenue, owned by CIM Group and Related Companies, and will leave Brookfield (BN)’s Gas Company Tower building.
Gregory Cornfield can be reached at firstname.lastname@example.org.