In Downtown Los Angeles, landlords provided unprecedented concession packages to tenants as a strategy to encounter long-term new leases and renewals for property stabilization.
Prior to Covid-19, between 2014 and 2019, the average tenant allowance per square foot for office properties was $71 psf. However, from 2021 to 2023, the average tenant allowance PSF value rose to $122.60, marking a substantial increase of 73% against the average figure from 2014-2019. The increase can be attributed to the steep rise in construction costs and raw materials over the last several years.
Looking forward, a regression of this trend is likely, and has slowly started due to capital constraints imposed by lenders and flattening of current and forecasted construction costs.