Introduction to the Los Angeles Office Market
Los Angeles might be known for entertainment and technology, but over the past year, those industries have given way to other types of companies when it comes to taking office space. Since last year, office absorption in L.A. has mostly been from so-called “traditional” office users like law firms and financial companies, according to L.A. Business First. The figures come from Avison Young’s mid-year outlook, which surveyed more than 250 commercial real estate professionals across the U.S.
Shift in Office Space Demand
Tech and entertainment companies signed major office leases in L.A. between 2021 and 2023, but these other firms have since started gobbling up a larger share, John Eichler, a principal at Avison Young, told L.A. Business First. “Downtown Los Angeles continues to have significant headwinds for a number of reasons, but there has been stabilized, net positive absorption from the law firms, financial services and finance,” Eichler said. “If you’re an office owner in L.A., I think at this point you’re probably better off owning in an area or an office building that has a significant presence of traditional firms, as opposed to owning in certain areas where most of the tenant absorption is coming from the tech and entertainment industry.”
Professional Services and Office Market Activity
Professional services companies like law, accounting, and consulting firms have doubled down on keeping their offices as companies continue to hammer out return-to-office orders and finalize what their office occupancy will look like. About 96 percent of survey respondents predict “steady or increased [office] market activity through year end,” Harry Klaff, Avison Young’s U.S. president, said. The office vacancy rate in Los Angeles was 24.2 percent in the first quarter, according to CBRE.
Coworking Spaces in Los Angeles
Meanwhile, Los Angeles remains the coworking capital of the country, attracting companies and employees who might not want to commit to full-blown leases and their own office spaces. In the first quarter, Greater Los Angeles had 304 coworking locations, up from 292 in the previous quarter. The shared work spaces in the first quarter covered more than 6.8 million square feet across the region. Coworking company Serendipity Labs has taken advantage of the interest, moving into a WeWork space in Costa Mesa earlier this month and planning an expansion in Orange County.
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Conclusion
The shift in the Los Angeles office market towards traditional firms such as law and financial companies is a significant trend. As the market continues to evolve, it will be interesting to see how this shift impacts the overall office landscape in Los Angeles. With the rise of coworking spaces, companies have more options than ever before, and it’s likely that the market will continue to adapt to meet the changing needs of businesses.
FAQs
Q: What type of companies are driving office absorption in Los Angeles?
A: Traditional office users like law firms and financial companies are driving office absorption in Los Angeles.
Q: What is the office vacancy rate in Los Angeles?
A: The office vacancy rate in Los Angeles was 24.2 percent in the first quarter, according to CBRE.
Q: Why are companies opting for coworking spaces in Los Angeles?
A: Companies are opting for coworking spaces in Los Angeles because they offer flexibility and do not require a full-blown lease.
Q: How many coworking locations are there in Greater Los Angeles?
A: There are 304 coworking locations in Greater Los Angeles, covering more than 6.8 million square feet across the region.
