In a promising turn for the Los Angeles office market, investment sales in the first half of the year reached a remarkable $1.8 billion, prompting many industry experts to declare that the market has hit its bottom and has potential for upward movement.
The second quarter of 2025 witnessed an impressive total of nearly $1.2 billion in office sales, more than doubling the amount from the same period the previous year.
According to a recent report by Newmark, the surge was significantly bolstered by five transactions exceeding $100 million.
In addition, the end of 2024 showcased the highest leasing activity for office spaces recorded in any quarter since early 2020.
Sean Fulp, the Head of Capital Markets for Colliers U.S. Southwest, expressed optimism about the current state of the market: “Now we are at a place where there are plenty of market comparables.
Whether it’s in a specific market or an adjacent market, there’s enough information for even institutional investors to start to assess the trajectory of the market.”
The increase in available market comparables, along with a growing array of distressed properties and shifting investor sentiments towards the office asset class, is driving the current uptick in transactions, according to office sales professionals.
“The absence of data points a year or two ago was one of the barriers to transacting, I think,” noted Kevin Shannon, Newmark’s co-Head of U.S. Capital Markets.
He elaborated on how the increase in comparables has led to increased transparency in pricing, facilitating better decision-making for buyers and sellers alike.
The surge in transactions can also be attributed to buyers seizing opportunities as they identify deals that present significant value.
Despite the upbeat sales figures, challenges remain as the impacts of hybrid work models and rising borrowing costs continue to affect office leasing activity.
Dain Fedora, Newmark’s Head of Southwest Research, highlighted ongoing pressures on lower-occupancy buildings, many of which carry loans approaching maturity dates, which is compounded by the urgency to sell.
Furthermore, Newmark reported that office market distress increased in the second quarter, revealing more opportunities for buyers ready to capitalize on these market conditions.
“Most of today’s active office investors are targeting desirable, overleveraged buildings available at significantly reduced prices,” Fedora stated.
This strategic approach allows these investors to reset debt payments and offer competitive rents, aiding in tenant attraction.
As of midyear, a staggering 47% of the LA office market’s inventory was classified as “economically unviable,” unable to meet its debt servicing obligations with generated income, according to Newmark’s analysis.
The report emphasized that this segment includes properties with occupancy rates below 70%, a critical threshold below which positive net operating income becomes difficult to achieve.
This ongoing situation can also lead to more buildings being placed on the market, as these properties often encounter refinancing challenges, pushing owners towards a sale as their most viable option.
Fulp noted that the market is currently in a cycle of transacting distressed assets that have been under pressure for over a year or two.
However, even with the overall LA office market experiencing approximately 25% vacancy, the process of resolution will likely take three to five years as properties transition through these channels.
Interestingly, there is a growing base of potential buyers returning to the office segment.
Private buyers have dominated the sales activity, accounting for roughly two-thirds of the transactions reported thus far in 2025, as noted by Newmark’s research.
Conversely, Real Estate Investment Trusts (REITs) have also stepped up their activity, participating in more transactions this year than in the entirety of 2024.
There are indications that institutional investors are starting to express renewed interest in office properties as well.
Shannon remarked that REITs are beginning to take an offensive stance, suggesting that as the market progresses in its recovery, institutional capital will feel increasingly comfortable re-entering the arena.
In prime markets and for the right properties, institutional investors are already making moves, as illustrated by the recent $151 million sale of a Playa Vista office building to Barings.
If a property meets criteria for being Class-A and is situated in a desirable submarket, the presence of institutional capital can often be anticipated.
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