In the third quarter, office leasing activity in Los Angeles County rose to its highest level since 2019, signalling a progressive stabilisation of the market. From July to September, tenants concluded agreements for approximately 4 million square feet of office space. This represents a 15 per cent increase compared to the previous year and a 0.7 per cent rise from the second quarter, according to data from Savills.
This surge in activity was largely driven by lease renewals. Six of the ten largest transactions of the quarter were renewals of existing tenancies. The single largest transaction was Raytheon's renewal for 144,709 square feet in El Segundo. This was followed by PwC's new settlement of 138,000 square feet in Century City and Pepperdine University's renewal for 117,495 square feet near Marina del Rey and Playa Vista. Advertising agency Innocean USA also occupied 101,000 square feet in El Segundo.
Decline in Availability and Rising Rents
The improved leasing performance is accompanied by a reduction in available space. Overall availability decreased to 26.5 per cent, a decline of 110 basis points since the second quarter and 170 basis points year-on-year. Available sublease space decreased for the eighth consecutive quarter, from 8.7 million square feet in the previous year to 6.3 million square feet.
The greatest improvements were observed in the Century City, Beverly Hills, and El Segundo submarkets. Meanwhile, several other areas in Los Angeles continue to show availability rates above 30 per cent. Miracle Mile recorded the highest office availability at 39.2 per cent, followed by Burbank with 37.1 per cent and Culver City with 37 per cent.
Market Development and Outlook
Although average asking rents decreased by 0.2 per cent compared to the second quarter, they increased by 0.6 per cent year-on-year. Rents for Class A office space rose by 0.8 per cent annually. Century City and Beverly Hills remained the most expensive submarkets, with average asking rents of $7.61 and $6.71 per square foot per month, respectively.
Savills predicts that landlords in prime submarkets will retain their pricing power as high-quality space becomes scarcer. At the same time, tenant concessions are expected to remain near their historical highs.
