Empty office square footage across Southern California has shot up 67 percent since the pandemic as more employees work from home.
Landlords in Los Angeles, Orange, Riverside and San Bernardino counties had 68 million square feet of empty offices last month, up from 41 million square feet in late 2019, the Orange County Register reported, citing figures from Cushman & Wakefield.
That marks a 67 percent increase for unleased space out of 325 million square feet of Southern California offices.
Just before the pandemic, the office vacancy rate across the Southland was 13 percent.
The overall vacancy rate is now 21 percent, and much higher in central business districts such as Downtown Los Angeles. That means 27 million more square feet of unused conference rooms, cubicles and water-cooler corners.
The 67-percent rise in empty offices equals all of the office space – filled and vacant – in either Memphis or New Orleans or Tucson, according to the Register.
The rise in office vacancies vary across the region.
Los Angeles County added 20.7 million square feet of empty offices since 2019, a 73 percent jump. Orange County added 6.3 million square feet, or 57 percent. And the Inland Empire added 300,000 square feet, or 21 percent.
At the same time, nationwide office vacancies grew 50 during the pandemic era, jumping to 19.2 percent from 13 percent.
The office exodus comes despite a surge in local jobs. Employment in the four-county region was at a record 8.04 million in May, or 48,000 workers above the end of 2019.
Working at home has killed the demand for offices, with fewer tenants equaling less cash flow. The McKinsey consultancy projects an $800 billion loss in office property values globally due to remote work.
In Los Angeles, Toronto-based Brookfield defaulted on more than $1.1 billion for mortgages tied to two high-profile office properties in Downtown, at Gas Company Tower and 777 Tower. In Orange County, twin office towers sold at a deep loss, with two Santa Ana office buildings being demolished for warehouses.
The top-ranked hotspots for empty offices include the first-ranked Los Angeles non-central business district, with 4.2 million square feet, or 32 percent vacancy. No. 2 is L.A. Mid-Wilshire, with 3.6 million square feet, or 29 percent, followed by third-ranked L.A. Downtown Central, at 7.2 million square feet, or 26 percent.
No. 4 on the Register’s market list of 16 regions list was L.A. West, with 13.7 million square feet, or 24 percent vacancy rate and fifth-ranked L.A. South, with 7.5 million square feet, or 24 percent, and sixth-ranked L.A. Tri-cities, at 5.9 million square feet, or 22 percent.
O.C. Central came in at 3.8 million square feet of empty offices, or 20 percent vacancy, at No. 7. Dead last was Inland Empire South, at 332,161 square feet, or 8 percent. The overall office vacancy across Los Angeles County was 26.6 percent in the second quarter, according to Savills, up from 25.1 percent during the same period last year. Much of that comes from subleasing, with nearly 2 million square feet on the sublease market over the last year.
— Dana Bartholomew
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