The office market in Greater Los Angeles is experiencing a noticeable revival, making it increasingly difficult to speak of a 'dead' market. According to a recent report by Savills, nearly 4 million square feet of office space was leased in the region in the second quarter. This represents an increase of almost 15 percent compared to the previous quarter and an increase of nearly 8 percent compared to the same period last year.
The quarterly result is also 22 percent above the five-year average for office leases and is approaching levels last seen in 2019. However, Savills points out that the recovery is uneven and continues to be primarily driven by renewals and relocations rather than new demand.
The largest transaction in the quarter was Bank of America's 137,873 square foot renewal and expansion with Hines and J.P. Morgan Chase at the South Tower of Century Park Plaza in Century City. Other significant deals included LA28's 57,512 square foot expansion in Downtown L.A., as well as Arrowhead Pharmaceuticals' 52,568 square foot and 49,449 square foot renewal and expansion with Rockpoint at 177 East Colorado Boulevard in Pasadena.
At the same time, the available sublease inventory decreased by another 2.8 million square feet over the past 12 months, which corresponds to an annual decline of almost 30 percent. In the second quarter alone, total available sublease space decreased from 7.4 million square feet to 6.7 million square feet, marking the seventh consecutive quarter of declining sublease supply. Sublease space in L.A. peaked at 11 million square feet in 2024.
Savills noted that part of the improvement in sublease availability is due to leases expiring and the space moving into general availability, rather than tenants actively absorbing the secondary space. As a result, total availability in L.A. stood at 26.6 percent in the second quarter, a decline of only 130 basis points year-on-year, despite the aforementioned 4 million square feet of leasing activity.
The average direct asking rent in the second quarter was $4.19 per square foot per month, a decrease of 0.4 percent from the previous quarter, but an increase of 1.1 percent year-on-year. Century City and Beverly Hills recorded the highest asking rents in Greater L.A. at an average of $7.67 and $6.71 per square foot per month, respectively. Beverly Hills saw annual rent growth of 4.7 percent, while Century City remained stable year-on-year.
Savills also reported that landlords continue to offer record-high incentive packages to remain competitive for tenants, which means effective net rents are significantly below stated rates. In terms of investment sales, Savills expects that distressed properties changing hands – such as Capital Group's acquisition of Bank of America Plaza for $210 million – could accelerate leasing activity.
