Los Angeles Office Investment Forecast
Positive Absorption in Major Office Hubs Generates Reasons for Optimism Amid Variant Emergence
Divergent conditions in large submarkets blur near-term outlook. Los Angeles' office sector is in for a lengthier recovery than many other major U.S. markets, having entered this year with a historically high vacancy rate. Nevertheless, fundamentals in several of the metro's major regions are improving at a standout pace. West Los Angeles and the South Bay, which comprise 35 percent of the county's inventory, both noted positive leasing velocity in the second and third quarters of 2021, as tenants absorbed a combined 1.8 million square feet. Most notably, Silicon Beach registered a collection of 50,000-square-foot-plus commitments, most of which were inked by entertainment and tech firms. Contrasting these regions, vacant stock and sublease availability in Greater Downtown Los Angeles and the San Fernando Valley continued to rise. The emergence of new COVID-19 waves and potential restrictions could extend these submarkets' recovery and halt positive momentum in West Los Angeles if major tech companies push back reopening dates. Still, a silver lining exists for the county, as deliveries fall to an eight-year low in 2022.