Los Angeles Market Update: Sluggish Construction Activity

As of May, Los Angeles had 8.7 million square feet of office space under construction, CommercialEdge data shows. Construction activity has yet to recover to pre-pandemic levels, as only 625,000 square feet broke ground in the first five months of the year, roughly 52 percent of the square footage added to the pipeline in 2020 over the same period (1.2 million), and well below 2019 levels (1.3 million). No projects were added to the pipeline in May.

Delays incurred during the global health crisis combined with a significant shift in office needs have led to an inflated delivery pipeline. More than 6.7 million square feet of office space is slated to come online this year, which would surpass 2020’s activity by 190 percent, as well as the peak activity recorded in 2017, when 3.1 million square feet were delivered. There are 13 properties expected to finish construction by the end of June, amounting to more than 1.4 million square feet—33 percent less than properties delivered in June 2020.

As of May, 51 properties were under construction or redevelopment in the metro, 26 of which are at least 100,000 square feet in size, while 16 properties are projects of more than 200,000 square feet. The pipeline features more than 4.8 million square feet of creative office space, which is in high demand especially in the media and film-driven submarkets. Developers are also focused on creating experiential buildings that have additional use types.

In Burbank, Invesco Real Estate is building Avion Burbank, a 60-acre campus which includes creative industrial space, hotel, retail, as well as 142,250 square feet of creative offices. The multi-phase development is expected to be fully operational by 2023, while the office component is slated to open in September this year.

Two properties came online in May, totaling 127,046 square feet. In the city’s CBD, GEM Realty Capital finished redevelopment of the 1914-built Norton Building at 755 S. Los Angeles St., which initially served as manufacturing space. It was renamed as “Fabric” and it totals 100,000 square feet, including creative offices and retail space.

In the East Los Angeles submarket, there is roughly 550,000 square feet of office space underway. Of the five properties, four are situated in Opportunity Zones. One of these is the project at 2130 Violet St. in the Arts District, which recently topped out. Developer Lowe expects to fully finish the property by early next year.