The office real estate market in LA County has been hit hard by the COVID-19 pandemic, with vacancy rates continuing to rise and rents stagnating or even falling. This is mainly due to the increase in remote work and large-scale workforce reductions by companies, leading to a significant drop in demand for office rentals. However, industrial real estate, including warehouses and factories, has performed relatively better compared to the office market, reflecting a mixed picture.

According to the commercial real estate media outlet Jones Lang LaSalle, as of the third quarter of 2024 (September 30), the average vacancy rate for LA County’s office real estate market reached 28.6%. This marks a 2.5-point increase from the same period in 2023, when the vacancy rate was 26.1%, and a 0.9-point rise from the previous quarter's 27.7%. With the increase in vacancy rates, office building owners are also facing defaults and bankruptcies.

In the third quarter of this year, the average monthly rent per square foot for Class A office buildings was $4.46, up 4.0% from $4.29 in the third quarter of last year. However, industry experts attribute this rise in rent not to an increase in demand but to inflation driven by the pandemic. While there are variations by region, most areas have seen a rise in vacancy rates. For example, in Wilshire Center, which includes LA Koreatown and Mid-Wilshire, the vacancy rate rose from 34.3% in the third quarter of 2023 to 37.1% in 2024, nearing 40%. Rents in the Wilshire Center increased slightly from $2.51 to $2.83 per square foot during the same period, but this is effectively stagnation when accounting for inflation.

Among regions in LA County, Culver City had the highest vacancy rate, at 40.3%, followed by Glendale (38.9%), Wilshire Center (37.1%), Miracle Mile (36.9%), Park Mile (36.7%), West LA/Olympic Corridor (36.4%), LAX/Century Boulevard (36.2%), Marina del Rey (36.0%), Santa Clarita Valley (35.2%), East Valley (33.5%), Burbank (32.4%), Santa Monica (32.4%), Long Beach Downtown (31.9%), Playa Vista (31.8%), Downtown LA (30.3%), and Beach Cities (30.0%).

In terms of average rent by region, Century City had the highest rent at $7.59 per square foot, followed by Santa Monica ($6.45), Playa Vista ($6.42), West LA/Olympic Corridor ($6.23), Beverly Hills ($6.13), Marina del Rey ($5.74), Culver City ($5.23), Westwood ($4.85), Hollywood ($4.83), Brentwood ($4.67), Miracle Mile ($4.65), Burbank ($4.49), El Segundo ($4.26), East Valley ($4.09), and Beach Cities ($4.05).

In contrast, LA County’s industrial real estate market, including warehouses and factories, has shown better performance than the office market, despite rising vacancy rates and falling rents.

As of the third quarter of this year, the average vacancy rate in LA County’s industrial real estate market was 5.5%, up from 3.0% in the same period last year, a 2.5-point increase. However, the industrial real estate vacancy rate of 5.5% is still significantly lower—by 23.1 points—than the office market’s average vacancy rate of 28.6%. The average rent per square foot for industrial real estate in the third quarter was $1.53, down 20 cents from $1.73 in the same period last year. Real estate experts predict that the office market in LA County will continue to see high vacancy rates and stagnant or falling rents next year due to the ongoing impact of the pandemic. While industrial real estate is expected to perform better than office real estate, its vacancy rates are still anticipated to rise steadily.

— Hwan-dong Cho

<Hwandong Cho>