Downtown Los Angeles office market report
Q3 2024
Office rental rates edged higher in Q3 2024 to $48.94 per square foot, marking a nearly $0.85 increase from $48.10 in Q2. This upward trend can be attributed partly to the escalation of operating expenses across various properties. Rising utility costs, increased maintenance expenditures, and inflation impacting the prices of goods and services have all contributed to this rise in operational costs. Meanwhile, tenant improvement allowances in Downtown Los Angeles remained competitive, holding steady at $120 per square foot for 10-year lease terms. Tenants negotiating leases exceeding 10 years have consistently benefited from 12 months of rent abatement. These extended abatement periods play a crucial role in incentivizing tenants to commit to new lease agreements.
Rental rates
Office rental rates held steady in Q3 at $48.94 per square foot, showing a slight increase from the second quarter's figure of $48.10. This is the 3rd consecutive quarter of rental rates increasing, showing the demand for leasing is slowly being driven up as office occupiers are signing more Trophy and Class A leases downtown.
Availability
Downtown Los Angeles total availability closed the third quarter of 2024 at 33.0%, raising the year-to-date availability to 31.4%. Availability has been on the rise each year since the beginning of 2017 with the previous most recent stretch of multi-year vacancy increases occurring between 2009-2013, the period following the Great Recession.
Leasing activity
A little over 1,000,000 SF has transacted through the first three quarters of 2024. Leasing activity in Q3 2024 has slightly picked up with 431,445 SF leased, compared to 356,759 SF in Q2 2024.
Net absorption
As of Q3 2024, the Downtown Los Angeles market has seen 850,810 square feet of negative net absorption across Trophy and Class A office space. The Central Business District accounted for 66% of this total, with 555,000 square feet of negative net absorption.
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