Q4 2020 Office Market Outlook – Los Angeles

The Los Angeles County Office market ended the year feeling the effects of an economy
that spent three quarters of 2020 under a COVID-19 shutdown. Since the onset of the
pandemic’s forced closure of non-essential businesses in March 2020, vacancy steadily
increased, up 70 bps from the previous quarter and 210 bps higher than Q4 2019 to
12.6%. Office space lost significant demand from extended stay-at-home orders, which
pushed vacancy to an eight-year high. In Q4 2009, vacancy hit 12% and peaked mid-
2013 at 13.2%. Rent would need to fall by more than 29% to match that point in time in
the wake of the Great Recession. Rent remained stubbornly high, for now, despite office
space being slow to lease. The average asking rent increased 11 cents from the prior
quarter to $3.44/SF FSG, up 3.9% from Q4 2019.

The drop off in office space use created challenges for tenants and landlords. Slack
demand hurt total leasing volume in 2020, down 49.5% compared to 2019. More tenants
are looking to unload square footage they no longer need than are looking for space.
Available sublease space shot up 72% year over year to more than 8.7M SF.