Los Angeles Office Leasing Improves Again to Finish 2024

While the Greater Los Angeles office market continues to stumble through an arduous transition period, it almost reached leasing levels in 2024 not seen in almost five years.

The market recorded more than 3.8 million square feet of leasing activity in the fourth quarter, which is slightly better than the third quarter and the most reported since the first quarter of 2020, when nearly 4 million square feet of space was leased, according to a report released Thursday by Savills.

For all of 2024, L.A. closed 13.7 million square feet worth of office deals, which is much better than the total from 2023, and the highest annual mark since the pandemic. However, it’s also still notably well below the nearly 18 million square feet of office leasing reported in 2019, the last full year before the COVID-19 outbreak hit America.

Further, the top leases signed in the fourth quarter were almost entirely expiration-driven renewals and relocations rather than new leases. The committee organizing the 2028 Los Angeles Olympics took the largest lease in the period, relocating to 160,000 square feet at LBA Realty’s 1150 South Olive Street in Downtown L.A.

Law firm Loeb & Loeb signed the second-biggest deal, a 130,000-square-foot renewal with Hines in Century City. The other top leases on the quarter included The Toy Association signing a 95,700-square-foot relocation in El Segundo, and Legendary Entertainment signing for less space in a nearly 90,000-square-foot deal in Burbank. Boeing signed the biggest new location leasing deal with a 75,600-square-foot sublease in El Segundo.

L.A.’s overall office availability rate — which measures the sum of vacant office space together with space on the sublease market, and space that’s about to hit the market — ticked down 10 basis points in the fourth quarter, but availability is still at a startling 28.2 percent.

The average asking rent for Greater L.A. ended the year at $3.95 per square foot per month, up half a percent from one year ago. The average monthly rate for Class A space is up to $4.17 per square foot, thanks largely to landlords of the trophy offices in Century City raising rates to historic highs — at $7.26 per square foot — to tap into demand from financial services and law firms in the flight-to-quality trend that ramped up after 2020.

The improved leasing in the fourth quarter, along with return-to-office policies, have led to cautious optimism going into 2025 as many in the real estate industry believe “the market has now bottomed,” Savills’ report read.

“On the other hand, the lack of new leasing activity from the tech and entertainment/media sectors has kept overall availability levels from decreasing further,” the report continued. “While Century City has no doubt benefited from the new normal in the post-pandemic era, much of the rest of the Los Angeles office market continues to bounce along the bottom as a full market recovery remains slow.” 

Savills researchers expect more private investors and owner-users, all looking for assets at well below replacement costs, to continue to take advantage of outgoing institutional owners suffering lower valuations. 

Case in point: the County of L.A. closed its $200 million deal in the fourth quarter to acquire and move into the beleaguered Gas Company Tower, despite the office building being valued at $632 million just a few years ago. The building was formerly part of Brookfield’s portfolio of Downtown L.A. office towers that suffered market-defining financial distress while its biggest tenants vacated for better locations, including Century City. Savills’ report also says distress will also continue to be an issue for office owners in L.A.

Gregory Cornfield can be reached at gcornfield@commercialobserver.com.