The Los Angeles office rental market is experiencing significant challenges as vacancies rise, giving tenants the upper hand in negotiations with landlords.
As the year began, the greater Los Angeles area found itself mired in historically high vacancy rates due to a persistent lack of tenant demand, despite efforts from management to encourage employees to return to the office.
A striking contrast can be observed in Century City, which stands out for its tight occupancy and some of the highest rents in the West.
Countywide, overall office vacancy has soared to 24.2%, according to real estate brokerage CBRE.
When factoring in “shadow” office space—leased but unoccupied—the total availability climbs beyond 29%, a figure that is roughly three times higher than what is deemed a balanced market for landlords and tenants.
Real estate experts had initially hoped for improvement by the end of 2024, anticipating recovery in a leasing market that had lagged since the onset of the COVID-19 pandemic.
This optimism stemmed from burgeoning calls for employees to return to the office.
However, subsequent wildfires and economic uncertainty linked to President Trump’s global tariffs have severely dampened those hopes.
CBRE property broker John Zanetos noted, “We were more optimistic heading into 2025,” as the county office market had witnessed year-end leases from notable tenants like toy producers Mattel and Jazwares.
The January wildfires brought business decisions to a standstill, and later in the quarter, confusion surrounding tariffs contributed additional uncertainty to the market landscape.
Michael Soto, vice president of research for Savills, remarked, “Anxiety is back in the market.”
He added that businesses may be delaying decisions on important financial moves such as initial public offerings and mergers, which typically drive acquisitions of office space.
The downtown Los Angeles office market, among the largest in the region, has seen vacancy rates climb to nearly 34%, with overall availability touching 37%, an uptick from the previous year, per CBRE data.
The challenges in downtown LA are long-standing, but the pandemic has exacerbated the situation as companies reduced their office footprints.
This downsizing has led to a decline in office building values, pushing some landlords into financial distress, complicating their ability to attract tenants.
Landlords face considerable upfront costs to prepare office spaces for new tenants as part of lease agreements and are also expected to maintain properties to meet tenant standards, a challenge when finances are tight.
Zanetos mentioned, “There are very few buildings that can actually transact” leases that offer necessary financial concessions to entice tenants, although those that can are thriving with over 90% leased.
There remains a demand for large office spaces in Los Angeles County, with the Los Angeles Department of Water and Power (DWP) actively seeking around 300,000 square feet to temporarily relocate employees during renovations of their historic headquarters on Bunker Hill.
Zanetos described this potential tenant acquisition as a “huge shot of positive absorption” for the office market.
DWP representative Joe Ramallo confirmed that renovations and the corresponding temporary move are still in planning, with DWP also considering the acquisition of a building.
In a notable real estate deal, Los Angeles County bought the 55-story Gas Company tower for $200 million, significantly less than its 2020 appraised value of $632 million.
Interestingly, Century City is thriving even amid the overall soft leasing market, showcasing low vacancy rates and high rents driven by steady demand, especially from law and entertainment firms like Creative Artists Agency.
Gary Weiss of LA Realty Partners highlighted that Century City has long been an attractive location for law firms, a trend that has accelerated since the pandemic, with firms choosing to expand there instead of downtown.
Among those making this shift are major firms like Latham & Watkins and Sidley Austin, as concerns about downtown—including rising homelessness and safety issues—push firms to relocate.
Weiss added, “Much of this is a reflection on what’s happening downtown,” capturing the shifting preferences of businesses.
The neighborhood benefits from high-quality buildings and first-rate security, making it a safe and clean alternative for businesses.
Furthermore, Century City is witnessing the construction of a new high-rise—the 37-story Century City Center—developed by Chicago-based JMB Realty, one of the largest property owners in the area.
With the Creative Artists Agency as the anchor tenant and other signed tenants like Sidley Austin and Clearlake Capital, the Century City Center is nearing full lease commitment, even before its completion slated for early next year.
According to CBRE, overall vacancy in Century City stands at 13%, while landlords are seeking nearly $7 per square foot per month, far above the county average of $4.29 for good-quality office space.
Sales of office buildings in the region have slowed, largely due to large institutional investors doubting the appreciation of property values sufficient for profitable resale after the typical five-year holding period.
Private investors and public entities, like Los Angeles County, have snapped up downtown office towers at significant discounts compared to what would be required to construct similar buildings from scratch.
Other private buyers are directing attention to relatively new buildings equipped with tenants, which are seen as low-risk investments.
Recently, Kingsbarn Realty Capital, a Las Vegas real estate firm, acquired the fully leased Vine Street Tower in Hollywood for $105 million.
This building, completed in 2017 and extensively renovated last year, is leased to Skims Body Inc., a shapewear and clothing brand co-founded by Kim Kardashian, highlighting the intersection of popular culture and real estate investment in the current market.
image source from：https://www.latimes.com/business/story/2025-04-25/trade-wars-fires-and-economic-uncertainty-cast-a-cloud-over-l-a-s-office-market
