Leases  ·  Analysis

$13.6B of CMBS Debt Tied to L.A. Offices Set to Mature by 2030


It’s no secret that the office market in Los Angeles is struggling to revive to pre-pandemic levels, and a new market report by Avison Young shows more distress in the foreseeable future.

More than $13.6 billion of CMBS debt tied to office space in L.A. is set to mature by 2030, with over 64 percent of that total reaching maturity by 2025, according to the report released Thursday. With vacancy rates at well over 20 percent in areas throughout the city, some office owners may be forced to either refinance their loans or sell their assets. 

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“The Greater Los Angeles office market has been slow to recover, which is in step with other major markets across the U.S.,” said Chris Cooper, Avison Young principal and managing director for Southern California. 

While L.A. has recovered most of the office-using jobs it lost during the pandemic, the share of remote job postings in the city has soared in recent months, reaching 16.1 percent as of August, according to Avison’s report. The lack of demand for office space has also sharply driven up vacancy rates: Total availability is currently 30 percent in South L.A, 26.4 percent in West L.A., 21.9 percent downtown, and 21.7 percent in Mid-Wilshire.

As such, CMBS bondholders for debt tied to the Gas Company Tower in Downtown L.A. rejected terms for a nearly 300,000-square-foot lease for the city’s housing department. That lease alone would have represented an 11 percent increase in quarterly office leasing activity for all of Los Angeles, according to a third-quarter office market report from Newmark (NMRK).

Yet, Cooper noted return-to-office strategies posited by large companies such as Google (GOOGL), Disney, Microsoft (MSFT) and Wells Fargo (WFC) indicate that there is a light at the end of the tunnel.

“We anticipate greater tenant activity by mid- to late 2024, as employers continue to mandate — or strongly encourage — a four- or five-day return-to-office policy, to encourage and grow company culture, collaboration and productivity,” he said.

L.A.’s office market fell back into the red due to strong absorption levels reported in the second quarter this year, according to Avison’s report. But, with some large leases transacted this quarter, absorption is anticipated to bounce back as tenants move into their spaces. Recent activity from ByteDance, parent company of the social media platform TikTok, is further evidence that conditions are beginning to change. The company added more than 143,000 square feet of office space with an expansion deal and sublease agreement in Culver City, Calif.

At $43.55 per square foot annually, average asking rates in the city have slightly receded this quarter, yet have remained relatively stable over the past several years. Rather than reducing rents, many landlords continue to offer generous concession packages.

Nick Trombola can be reached at