Data Courtesy of CoStarâ„¢
The Los Angeles office market remains challenged, with vacancy stubbornly elevated at 16.1%, a historic high and about 200 basis points above the national average, 14.0%. Hybrid and remote work patterns, as well as a contraction in key sectors like tech and entertainment, have led companies to reevalue their office footprints or pause expansion plans. A weak labor market coupled with outmigration are also contributing to the office market's struggles.
Companies reevaluating their space needs has led to a glut of vacancies in the market. Net absorption has been negative at -1.7 million SF in 2025, the seventh consecutive year of negative net absorption in Los Angeles. 28 of the 48 submarkets have posted negative net absorption in Los Angeles in the past twelve months. Large lease activity has also been relatively quiet during the past two years, with large block availability increasing 8% year over year. Most major leases being signed involve downsizing. For example, KPMG signed 69,455 SF in the US Bank Tower in Downtown L.A., which was recently renovated in 2023. This new lease is about 20% less than their current space.
Groundbreakings are at record lows due to a challenging financing market and uncertainty about future office demand. Less than 200,000 SF of new construction started in 2025, with the latter half of the year having zero new construction starts. Like 2024, net deliveries ended the year in red, with -2.4 million SF removed from inventory. Demolitions in 2025 were on par with the highest recorded 2.3 million SF demolished in 2016. Expansion of the Adaptive Reuse Ordinance in late 2025 encourages developers to convert obsolete office buildings into multifamily apartments. Arco Tower at 1055 W. Seventh St. in Downtown Los Angeles is currently the largest adaptive reuse project underway by Jamison Properties. The conversion removes about 1 million SF of office inventory into over 600 multifamily units.
12 Mo Deliveries in SF
12 Mo Net Absorption in SF
Vacancy Rate
12 Mo Asking Rent Growth
12 Mo Sale Volume
Despite low demand and modest supply side pressure, asking rents across the metro have remained stable at $42.00, showing minimal movement since 2021. This steady rate reflects landlords' preference to offer substantial concession packages rather than reduce asking rents to preserve building values. According to market participants, some TI packages are near $175-200 PSF, depending on asking rent. With these headwinds, rent increases are projected to be minimal in the near term, sub 1%.
The house view has high vacancies and weak rent growth persisting through mid 2027. Absent a substantial resurgence in local industries and/or meaningful policy reforms, downside risk looms as the Los Angeles office market contends with structural difficulties. Rent growth could turn negative by year end and persist until 2029. However, a lack of new supply could provide the biggest upside to the forecast, as an increase in demand could quickly absorb excess inventory and start the beginnings of a market recovery
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