L.A. Office Leasing Down Sharply in 2023: Savills
Demand mostly ‘expiration-driven’ at this point
By Greg Cornfield January 2, 2024 4:00 pm
reprints
It’s been a dark winter already for office brokers and investors in Greater Los Angeles.
The region reported less than 2.2 million square feet of leasing in the fourth quarter, down 28 percent from the 3 million square feet signed in the third quarter and 26 percent from the same period last year, according to a Savills report released Tuesday.
Leasing activity for the year hit about 10.5 million square feet, which is down 15 percent from 2022 and down 42 percent from the 18 million square feet recorded in 2019 before the pandemic.
L.A.’s office availability rate — which is the sum of vacant space and soon-to-expire leases — is close to 27 percent, a record high. Downtown L.A.’s availability rate is up to 29.7 percent. Glendale, Culver City, El Segundo and Miracle Mile all have availability rates above 30 percent.
The overall average asking rental rate is $3.93 per square foot per month, up 2.1 percent from a year ago as continued new speculative office development and higher priced trophy space becomes available, Savills reported. Century City remains the most expensive office market in the region at $6.83 per square foot per month, and it’s the only submarket above $6 on average. Beverly Hills is at $5.92 per square foot; Santa Monica is at $5.83 per square foot; and West Hollywood is at $5.70 per square foot.
“Previously, discretionary leasing has largely remained on the sidelines in 2023 as the majority of deals continue to be largely expiration-driven,” Savills said in the report. “Although, with the Hollywood strikes over … there is cautious optimism that leasing activity will increase in 2024.”
Additionally, with the Federal Reserve signaling the possibility of three interest rate cuts next year, a wave of dealmaking could start sooner than expected, while the technology sector becomes active again locally, especially in verticals like generative A.I.
The biggest leases of the quarter included L.A. County government departments signing a new 207,300-square-foot lease for 15 years in a deal valued at $166.7 million, followed by law firm Shappard Mullin’s 118,200-square-foot lease. Law firm Sidley Austin’s 66,600-square-foot extension at 1999 Avenue of the Stars was the third-largest of the quarter.
The County of L.A. also notably signed a 50,756-square-foot lease renewal at 3179 Temple Avenue in San Gabriel Valley, as well as a new 41,040-square-foot lease on Sunset Boulevard in Hollywood.
Gregory Cornfield can be reached at gcornfield@commercialobserver.com.
