Fewer companies are leasing office space in Los Angeles.
About 2.2 million square feet of office leases were signed in the first quarter of this year — down 37 percent compared to the last quarter of 2022 and about 40 percent year-over-year, according to a CBRE report.
For the third quarter in a row, more office space was put on the market than was taken off by new tenants — about 1.3 million square feet, or almost triple the figure from the fourth quarter of last year.
The report paints a drab picture of L.A.’s office market, which has suffered from an apathetic return to the office, layoffs and a lackluster appetite for new space.
Despite the huge drop in activity, rents have remained stable, suggesting landlords haven’t been willing to budge on prices. Across L.A. County, asking rents for Class A office properties averaged $4.16 in the first quarter — the same as the prior period — marking an historical high.
But CBRE noted allowances for tenant improvements have increased, with landlords trying to “offset the historically high rates with hefty concession packages in an effort to drive leasing activity.”
Though leasing is down across the county, some areas have carried their weight with strong demand. Of the total square footage leased in the first quarter, 37 percent was located in West L.A.
Sony, Apple, entertainment firm 5th Season and MCI Communications Services all signed long-term deals across West L.A. in the first quarter, according to CBRE. In February, Sony leased 225,000 square feet at Onni Group’s Wilshire Courtyard complex at 5700 Wilshire Boulevard.
The county of L.A. has been “materially affected” by rising interest rates, inflation, as well as new legislation including the city’s new transfer taxes that went into effect at the beginning of this month, according to the report.
“This has led to a sharp decrease in sales and loan origination activity, causing prices to decrease for office properties,” CBRE said.