Downtown Los Angeles office market reports

Q2 2022

The Downtown Los Angeles office market leasing activity remains strong with notable transactions in the Financial District, Bunker Hill, and the Fashion District. Forever 21 is the second apparel brand after Adidas to secure office space at the renovated California Market Center for 162,275 sf. TWC Group, Inc signed a lease to relocate to 140,000 sf at City National Plaza North Tower with plans to occupy the space in Q1 2024. Mayer Brown signs a new 54,018 sf lease at the Wells Fargo Center North Tower on Bunker Hill. Office occupancy reached 41.8%, the highest point since the pandemic began in 2020 showing signs of improvement in office space demand according to Kastle Systems’ card-swipe reader.

4.5%

Economic Conditions

  • The Los Angeles Metro area’s unemployment rate registered 4.5% as of May 2022, which is below the rate of 9.7% a year ago and down from the pandemic’s peak of 19.2% in May 2020.
  • Physical occupying of office averaged 41.8% during June 2022, the highest percentage since the pandemic began in 2020.

Recovery Rate

  • Hybrid work schedules continue to be offered on a company-by-company basis, requiring employees to return to the office between 2 to 4 days a week.
  • Touring momentum continued throughout Q2 2022, indicating signs of recovery for office market leasing.
48%

Office Demand

  • Leasing activity in Q2 2022 is up 48% when compared to Q2 of 2021, on track to be the best year since 2019.
  • DTLA has seen a decrease in occupancy since 2021 and has lost over 974,629 sf during that span.
  • Forever 21 plans to relocate its headquarters from Lincoln Heights to the recently renovated California Market Center signing a lease for 162,275 sf, the largest office lease in Downtown Los Angeles since the start of the pandemic.
27.3%

Office supply

  • Total office vacancy registered 27.3% at the end of the second quarter of 2022, up 0.9% from the quarter prior when DTLA reported a record high 26.4%. The Historic Core and South Park were larger contributors of vacant square footage to the market.
  • At the end of the first quarter, the office development pipeline which is all located in the Arts District or Chinatown totaled 849,100 sf across 6 properties.
$46.32 psf

Pricing trends

  • Office rents have held steady at $46.32 psf full service gross per year for Q2 2022.
  • Rather than decreasing rents, landlords have been more inclined to provide larger concessions. Tenant improvement allowance averages are just above $127 psf for Class A buildings.
0.75%

Capital markets

  • The Federal Reserve on June 15, 2022, lifted interest rates by 0.75 percentage points, the third hike this year and the largest since 1994.
  • Federal Reserve officials are likely to raise interest rates by at least 0.75 percentage points later this month as part of an aggressive effort to combat high inflation.
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