Q4 2022 Office Market Outlook – Los Angeles
Los Angeles County’s office market remained on a slow path to recovery, as companies worked to bring employees back to the office while others cut back on office space. Elevated vacancy, uncertain demand, and added construction haven’t led to a general cut in asking rent to boost occupancy. While completed construction added over 2 million square feet, mostly vacant, to the inventory in 2022, the market was faced with more sublease office space coming online. The vacancy rate rose 100 basis points from last year to 15.1 percent, increasing each quarter since the pandemic shutdown.
TRENDS TO WATCH
Adaptation to new hybrid and remote workplace strategies will slow the office market as it faces a sizable 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 came from big tech downsizing with job cuts also in the financial sector. Tenants will be more selective about their office space needs and to maintain flexibility pursue signing short-term leases. Landlords will be much more receptive to tenant needs, take this time to position their buildings for the office of the future to improve occupancy, and strive to maximize revenue.