The pandemic continues to bedevil the Los Angeles office market, with nearly a quarter of its space currently or soon to be available, according to one recent brokerage report.
The downbeat outlook continues a year-long trend and comes despite a recent uptick in leasing activity that owed largely to tech and media firms, which accounted for the bulk of biggest deals in the final quarter of 2021, according to a new Savills report cited by the Commercial Observer.
Such companies fueled the market before the pandemic and now drive office demand on L.A.’s Westside, where some submarkets report record highs in rent.
“Overall, the tenant flight to quality into trophy Class A properties, as well as new creative office projects in the most in-demand submarkets, is expected to continue into next year,” according to Savills.
The London-based firm reports Los Angeles County added 2.4 million square feet of office space in the past year.
A pandemic-era high of 3.6 million square feet in leasing activity in the fourth quarter brought total office leases for the year to 11.9 million square feet, a 25 percent jump from 2020.
The total on leasing for 2021 was 34 percent off the 18 million square feet for 2019, just prior to the pandemic.
L.A.’s total available office space, including its vacant and soon-to-be vacant offices, remained flat at 24.4 percent in the fourth quarter– and stuck at its highest level in more than a decade, according to Savills. The decade high was first reached in the third quarter, slightly above the 24.1 percent in Q2.
“Despite the overall Los Angeles economy now reopened, a more robust office market recovery continues to depend on the path of the coronavirus as many workers remain at home, especially in light of the recent Omicron variant at year-end,” according to Savills’ report.
Office availability rates varied between Los Angeles County cities and neighborhoods, and the overall office market is expected to be similarly uneven throughout 2022.
Concessions such as rental abatement and tenant improvement allowances are at an all-time high as landlords aggressively compete to fill offices, according to Savills. The long-term effect of employees working from home remains unknown.
Burbank outperformed the rest of L.A. County at just over 10 percent office availability, followed by the San Gabriel Valley at nearly 13 percent.
The highest number of empty offices were in Playa Vista, Miracle Mile and the southeast San Fernando Valley, at more than 30 percent, with Pasadena and Downtown L.A. hovering around 29 percent availability.
Technology, advertising, media and information firms — or TAMI firms – represented more than 58 percent of major transactions by square footage, with 25 percent of major deals occurring in Westwood and West Los Angeles.
Top leases of the year-end quarter included the Riot Games taking a combined 280,300 square feet at 12100 and 12101 West Olympic Blvd. on the Westside, plus a 132,000 square-foot sublease at 3301 Exposition Blvd. in Santa Monica.
Other big leases included a 145,000-square-foot headquarters and training facility leased by the L.A. Chargers in El Segundo; USC Information Sciences Institute inking a 127,000 square-foot lease in Playa Vista; Adidas moving to a 106,303 square-foot office in Downtown L.A.; and Roku expanding to nearly 94,000 square feet in Santa Monica.
[CO] — Dana Bartholomew
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