Although everyone was hoping for a recovery in 2021, Los Angeles office rental activity is still pale compared to pre-pandemic levels.
A new report from Savills It is estimated that LA added about 2.4 million square feet last year and rented about 3.6 million square feet in the fourth quarter of 2021, a quarterly high since the pandemic broke out. But with 11.9 million square feet of office space rented last year, 2021 was 34 percent less than the 18 million square feet gobbled up in 2019.
Savills also estimates that LA’s total available office space – or the sum of vacant and soon-to-be vacant space – is 24.4 percent, its highest level in more than a decade, showing just how weak the office market is right now.
“A more robust recovery in the office market continues to depend on the coronavirus as many workers stay at home, especially given the latest Omicron variant at the end of the year,” said the Savills report.
Burbank, which surpassed the rest of LA County in 2021, has the lowest availability rate at around 10 percent. The highest available spaces include Pasadena and Downtown LA, each with 29 percent, and Miracle Mile and Playa Vista, with a combined total of over 30 percent.
The tech and media firms that fueled the pre-pandemic market remain a bastion on LA’s west side, where some submarkets are reporting record rents. It also shows that the market continues to experience very uneven conditions and an uneven recovery.
“Overall, the quality of tenants’ flight into Trophy Class A properties and new creative office projects in the most popular sub-markets should continue into the next year,” says the Savills report.
Riot games led the market in a big way in the fourth quarter. The company signed the neighborhood’s largest lease, totaling 280,300 square feet 12100 and 12101 West Olympic Boulevard on the west side. The company also signed one 132,000 square meters of sublet in Santa Monica.
Other notable leasing contracts from the fourth quarter include the LA chargers‘ 145,000 square meter corporate headquarters and training center in El Segundo; USC Institute for Information Science Signing for 127,000 square feet in Playa Vista; Adidas Moved to 106,303 square feet in Downtown LA; and year Expansion to nearly 94,000 square feet in Santa Monica.
This New Year is expected to be just as uneven as 2021. Concessions like rent reductions and tenant improvement allowances are at an all-time high as landlords aggressively seek to fill the open space. And Savills assumes that favorable tenant conditions will remain in place for the foreseeable future.
Gregory Cornfield can be contacted at [email protected].
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