Los Angeles office market reports
Q1 2022
The Los Angeles office market continues to experience a positive increase in touring activity at a slow but steady pace to start the year from tenants that had previously held off their office leasing search due to the COVID-19 pandemic. Employers are now eager to capitalize on the generous concession packages and flexible terms offered by landlords to accommodate their return-to-work policies.
Inventory
An increase in deliveries during the coming years will cause this number to increase as developers continue to expand on new developments throughout the various submarkets. At the end of the first quarter, the office development pipeline for Los Angeles totaled 33 properties for 4.5 million square feet.
Net Absorption
Los Angeles experienced quarter-over-quarter negative absorption as companies downsize and new space is being delivered to the market. There was positive absorption reported for the first time in 6 quarters of over a million square feet in Q4 2021.
Direct Asking Rent
Asking rents appear to have increased by 1.2% since the beginning of 2021 and averaged $3.39 psf on a full services basis at the end of the Q1 2022.
Availabilities
The total available office space checked in at just under 70 million square feet for the Los Angeles area at the end of Q1 2022. Concession packages have become more generous in recent months, the latest indication of tenant-favorable market conditions.
Vacancy
Vacancy increased by 50 basis points in Q1 and is beginning to stabilize. We are also witnessing increased tour velocity in most submarkets. The direct vacancy rate and the sublease vacancy rate both increased to 14.1% and 1.4% of the total market inventory respectively.
Investment Sales
The average sales price for the transactions in Q1 2022 was $362 psf. There is suppressed investment volume in the office sector as investors have deployed capital in other asset types such as multifamily and industrial.
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