Los Angeles Office Market ‘Has Bottomed,’ Gravitates Farther West

Los Angeles’ office real estate has reached its post-pandemic bottom — but it apparently plans to hang around there for a while. 

The market recorded 3.4 million square feet of office leasing in the first quarter of 2025, according to Savills. That’s lower than the previous quarter, but better than the 3.2 million from the same period last year, and higher than the 2.9 million-square-foot five-year quarterly average. 

“Elevated leasing activity seen in Q1 2025 has provided cautious optimism that the market has bottomed,” the report states. “On the other hand, most activity remains renewals as occupiers have firmed up their return-to-office plans in recent months.”

The average asking rent also ticked down from the previous quarter to $3.94 per square foot per month, which was also the same as it was at this point last year. However, the asking rental rate for Class A space ticked up 1.7 percent to $4.20 per square foot.

Similarly, Downtown L.A.’s average asking rent was 7.6 percent below the region average, while the submarkets of Beverly Hills, Santa Monica, West Hollywood and Culver City continued to see record-high asking rents amid the larger flight to quality. Century City remains the most expensive market with an average asking rent of $7.27 per square foot.

“The overall market has been slower to recover, with only trophy buildings mostly in Century City seeing rental rate growth from higher occupier demand,” per Savills.

L.A.’s overall office availability — which is the estimated rate of vacant space, open sublease space and soon-to-expire leases that aren’t being renewed — was down slightly over the first part of the year, but still is at a high 27.9 percent and hasn’t improved since last year.

Downtown L.A.’s availability is much higher at 37.7 percent, while Century City and Beverly Hills have closer to just 21 percent and 20 percent availability, respectively.

Savills reported that available sublease space decreased by 800,000 square feet year-over-year, lowering availability a bit. Also, the report notes that a wave of owner-users acquiring office buildings, along with new office-to-residential conversions, are a large reason why availability fell since 2024.

“As a result, the Los Angeles office market’s inventory has decreased by nearly 6 million square feet compared to a year ago as demand continues to flow to the best properties in the most desirable submarkets,” the report said. 

The tech, entertainment and media sectors that for years drove L.A.’s economy and office real estate market alike are not nearly the same as they have been historically. Those companies aren’t expected to make big new lease deals this year, either.

Instead, Savills is looking to health care, education and retail occupiers for demand growth this year. In the first quarter, the two largest leases were two relocations: Regal Medical Group’s 157,000-square-foot deal with Brookfield (BN) in West San Fernando Valley; and Spin Master’s 132,300-square-foot deal with Tishman Speyer in Playa Vista.

Also, the County of Los Angeles continues to bolster the region’s stat sheet with three leases — all renewals — for more than 191,000 square feet of office space in the San Gabriel Valley during the first three months of 2025. The government entity also signed a 43,800-square-foot office expansion at J.H. Snyder’s SAG-AFTRA Plaza.

Southern California’s post-pandemic return-to-office trends are still far behind the national average (which was already a lot slower than landlords would have wanted). Kastle Systems, which tracks U.S. office utilization in major markets, recently reported that L.A. office buildings are at just 49.3 percent occupancy. That’s another way of saying half the market is unused on the average weekday.

“Landlord concessions are expected to remain high amidst near record-high availability levels as building owners continue to aggressively compete for occupancy,” Savills concluded. “With office valuations down significantly, expect more owner-user acquisitions this year as certain occupiers realize it might make more sense to own rather than lease.”

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