Q1 2023 Office Market Outlook – Los Angeles
The Los Angeles County office market is experiencing a slow recovery, with companies bringing employees back to the office while others cut back on office space. Despite elevated vacancy, uncertain demand, and added construction, asking rents have not been reduced to boost occupancy. Completed construction has added over 280K square feet, mostly vacant, to the inventory in Q1 2023, but the market is dealing with an unprecedented amount of sublease office space. The vacancy rate is up 150 bps from last year at 15.7%, increasing each quarter since the pandemic shutdown.
Trends to Watch
The office market is facing a sizeable post-pandemic transformation and risk of a recession. An uncertain economy means downsizing for some businesses, expansion for others, and shutting down for many. Much of the sublease space coming on the market was from big tech downsizing with job cuts also in the financial sector. Tenants will be more selective about their office space needs and pursue short-term leases to maintain flexibility. Landlords will be much more receptive to tenant needs and position their buildings for the office of the future to improve occupancy and maximize revenue.