Posts by Tucker Hughes

COVID-19’s Effect on the Los Angeles Office Market; What’s to Come in the Future

Tucker Hughes on September 02, 2020

After nearly a ten-year run of consistent rental growth and strong market fundamentals, the commercial real estate industry, including nearly all real estate product types, has suddenly found itself faced with extreme challenges.

COVID-19 has been a brutal shock to the world economy and the economic spillover into the commercial real estate industry is just beginning, and will be severe. 

Los Angeles’ second quarter of 2020 ended with more total office space on the market than we have ever seen in the county’s history. This consists of a total of 49.0 million square feet of available office space in a market that totals 425.3 million square feet in size. This puts the total amount of available space at 12.8%. 

There are many other factors that are equally as alarming. For example, there is an unprecedented amount of sublease inventory that is hitting the market. From the first to second quarter of this year, the office market experienced a 20.4% increase in sublease availability, which is the highest ever recorded single quarter increase in the county’s history. Leasing activity also fell to its lowest level ever recorded, coming in at 2.17 million square feet for the quarter versus the prior year’s average of 6.46 million square feet per quarter, which has generally been stable for the last decade. This all is happening at the same time that we have the highest ever recorded amount of new construction being built.