Q3 2019 Southern California Office Market Outlook

The overall vacancy rate for office space in Southern California was 9.5%, steady from the previous quarter and down 20 bps from a year ago. Markets with significant construction saw vacancy tick slightly upward quarter over quarter as new office space came online.

Fundamentals in SoCal’s office market remained solid in the third quarter. Office sector employment in the five-county region added 75,600 new jobs from September 2018 to September 2019, helping to maintain office market occupancy. Coworking companies, which lease a tremendous amount of office space in major markets, may signal a marketplace slowdown if they fail to perform as expected.

In the third quarter, the average asking rent for office space in Southern California increased 4.2% from Q3 2018 to $3.01/SF— a record high. Robust demand for office space, along with significant completed construction, contributed to the rise in the average rent. Since 2018, over 5.9M square feet of new construction has been added to the region – mainly in Los Angeles and Orange Counties. Rent is expected to continue to rise as the remaining 7.5M square feet of office space under construction comes online in the coming year.