Third Quarter 2025
L.A. County Office Market Searches for Stability as Vacancy Persists
Excess supply and economic uncertainty keep pressure on office fundamentals.
Sublease discounts widen to a record gap against direct asking rents.
MARKET OVERVIEW
The L.A. County office market’s recovery remains constrained by weak demand, newly completed space sitting idle, and persistent vacancy. Landlords are hesitant to adjust asking rents despite elevated availability, limiting leasing momentum. As of Q3, 30.5% of office construction delivered since 2020 remains unoccupied.
While subleasing has helped slow vacancy growth, the market continues to contend with an exceptionally high volume of sublease space. Remote work, evolving space utilization strategies, and discounted sublease offerings have all contributed to the decline in the previously relentless accumulation of vacant space. This quarter, the overall vacancy rate fell 20 basis points quarter over quarter but remained 10 basis points above last year, at 16.7%.
Over the past three quarters, 107,229 square feet of newly built office space has been added to inventory, with 58.3% still available for lease. Vacancy has increased in most quarters since Q2 2020 at the onset of the pandemic, peaking at 16.9% in Q2 2025. For roughly five years, vacant space has stayed well above the peak recorded during the Great Recession. Sublease availability, while trending down, remains elevated. It averaged 10.4 million square feet per quarter over the past two years and declined to 9.2 million square feet this quarter—still 24.3% above the peak during the Dot-Com Bust.
Despite the high volume of space on the market, direct asking rents remain persistently elevated. Year-to-date leasing activity is down 10.5% compared to the same period in 2024, searching for its cyclical bottom. Landlords are under pressure to secure tenant commitments through concessions, including lower rents, free rent, and more flexible lease terms.
TRENDS TO WATCH
The surge in available office space is driven by evolving remote work patterns and changes in space utilization, but boosting demand will require lower rents and a stronger job market. Tenants continue to hold leverage, and the volume of available space forces landlords and sublessors to remain competitive with concessions.
Unemployment in Los Angeles County has risen throughout the year and is now near 6%. Office-occupying sectors are underperforming. Due to the federal government shutdown, September employment figures are unavailable; the latest data reflects August reporting from the State of California Employment Development Department. Financial Activities lost 4,900 jobs, Real Estate and Rental and Leasing shed 2,500 jobs, and Professional and Business Services declined by 9,800 jobs. Core office-demand sectors have contracted year over year. Information sector employment, which includes a significant portion of tech jobs, fell by 1,200 jobs over the past year. Overall, these office-occupying sectors lost 18,400 jobs year over year.
Sublease availability remains near record highs, and pricing continues to fall. The average sublease asking rent declined 13.4% over the past two years to $2.71 per square foot full-service gross in Q2, down 3.9% from Q3 2024. Sublease rents are currently discounted 21.4%, or $0.74 per square foot, compared to direct asking rents—the widest gap on record. These discounts are helping reduce sublease availability, which fell 7.3% quarter over quarter and 19.3% year over year. By comparison, direct availability decreased only 1.7% quarter over quarter and 2.4% year over year.
Sublessors seeking to fill excess space are offering significant rent concessions, competing with landlords for a shallow pool of active tenants. Currently, tenants hold the advantage in negotiations, while landlords strive to maintain property values. These dynamics continue to shape the L.A. County office market.
