L
os Angeles' commercial real estate market took a hit in 2024, with sales plummeting compared to the previous year. According to NAI Capital's market trend analysis, L.A. County saw an 18.4% drop in commercial property sales through the first three quarters of this year, while the City of Los Angeles experienced a staggering 40% year-over-year decline, resulting in $1.9 billion less in sales compared to last year.
Several factors contributed to this downturn, including falling property values, inflation, and elevated interest rates. The implementation of Measure ULA, which imposes taxes on deals over $5.15 million and $10.3 million, also had a chilling effect on activity. Industrial and office sales suffered the most, with declines of 63.2% and 45.1%, respectively.
The city's office market is particularly dire, with many Downtown L.A. towers facing financial distress. The Gas Company Tower, for instance, has been searching for a new owner since it was transferred to receivership in the spring. Meanwhile, the 801 Tower traded hands for $60 million via loan sale, significantly lower than its original purchase price.
Office sales have tanked 55.4% year-to-date compared to pre-pandemic levels, with landlords offering substantial concessions to attract tenants. However, the median per-square-foot sale price of offices rose 9.2% year-over-year, indicating a possible adjustment to the market's new normal. Retail properties also saw a 9.2% increase in price per square foot.
One notable exception was One Cole Group's $39.2 million deal for retail space in Beverly Hills' Golden Triangle district, which fetched a record-breaking $3,524 per square foot. Industrial sales dropped by 20.4% year-to-date due to declining lease rates and high interest rates, with the median sale price per square foot falling by 16.6% quarter-over-quarter.
Looking ahead, several state legislation measures could impact market activity in L.A., including Proposition 33, which aims to expand rent control, and AB 98, which will regulate statewide warehouse development starting in 2025.
