Greater L.A. Leasing Activity Comes To A Halt
- As the economic impact of COVID-19 continued to unfold during the second quarter, leasing activity in Greater Los Angeles came to a halt falling 62% compared to one year ago.
- Tenant move-outs occurred mainly in the West L.A., San Fernando Valley and South Bay submarkets, driving down demand by more than 1.05 million square feet. Vacancy increased accordingly by 30 basis points to 14.0%.
- No new office buildings were delivered market-wide. More than seven million square feet remain under construction, of which 60% is expected to deliver in 2020.
- Rental rate growth recorded a year-over-year drop of a $0.01 (-0.2%) to $3.23 per square foot (PSF) full-service gross (FSG).
- In May, the L.A. County unemployment rate jumped to 20.9% as the market lost 602,600 non-farm jobs, with the leisure and hospitality industry being especially hard-hit (-44%).
Los Angeles County Office Market:
Due to the uncertainty of the economic impact of COVID-19, leasing activity came to a halt as tenants reexamined their future business options, which could have an impact on their square footage footprints. Both tenants and landlords are working together to find the best leasing solutions as most businesses cannot work in their offices nor predict the longterm business impact. In many cases, leasing terms are being handled on a case-by-case basis as some tenants are electing to sign short-term renewals or month-to-month options.
Leasing volume decreased by 62% in comparison to last quarter, while overall absorption recorded over a million square feet of negative absorption for the Greater L.A. market. All submarkets, except for Downtown Los Angeles and Tri-Cities, recorded negative tenant movement as overall vacancy jumped to 14.0%.
The Los Angeles Basin office market is comprised of 314.5 million square feet of multi-tenant office space in buildings 25,000 square feet or larger. It ranks as the third largest office market in the nation, following New York City and the Greater Washington D.C. area. Most of its space, 55%, was built in or after 1985, making it a relatively young market. It is also relatively decentralized, with only 11% of the space located within Downtown Los Angeles and 89% dispersed throughout the region. Low-rise buildings make up 40% of the space, followed by 31% in mid-rise buildings and 29% in high-rise structures.