{"id":1004663357,"date":"2023-05-22T06:05:00","date_gmt":"2023-05-22T14:05:00","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004663357"},"modified":"2023-06-01T07:01:25","modified_gmt":"2023-06-01T15:01:25","slug":"los-angeles-ended-q1-on-a-slow-note","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/los-angeles-ended-q1-on-a-slow-note\/","title":{"rendered":"Los Angeles Ended Q1 on a Slow Note"},"content":{"rendered":"
\"Image<\/a>

Image by RoschetzkyIstockPhoto\/iStockphoto.com<\/p><\/div>\n

Los Angeles\u2019 office market still struggled to overcome its post-pandemic woes, in line with most major U.S. metros. Hybridization of work and the ongoing interest rate hikes<\/a> have provided a combination of challenges for office providers to surpass.<\/p>\n

The office construction pipeline is shrinking in Los Angeles, following national trends, while deal volume is also significantly down from a year ago. In the first quarter, several large leases proved that demand is still positive, albeit skewed toward the metro\u2019s massive creative office segment.<\/p>\n

Read on for key insights into Los Angeles\u2019 office market performance during the first quarter, based on CommercialEdge <\/strong>data.<\/p>\n

Supply favors creative office segment<\/h2>\n

As of March, Los Angeles had 2.6 million square feet of office space under construction. This represented 0.9 percent of total stock, only half of the 1.8 percent national rate. Development of new office space has slowed down post-pandemic, as traditional office users nationwide have slowed or halted expansion plans. No construction starts were recorded during the first quarter.<\/p>\n

Compared to other gateway markets, Los Angeles\u2019 office pipeline stood among the bottom half. San Francisco\u2019s office space underway represented a 5.1 percent expansion of its current stock, followed by Miami (3.3 percent), Manhattan (2.0 percent) and Chicago (1.2 percent). Among all major metros tracked by CommercialEdge, Austin had by far the largest expansion of its stock underway, at 7.0 percent (6.2 million square feet).<\/p>\n

\"Second<\/a>

Second Century. Rendering by Sora, courtesy of Gehry Partners<\/em><\/p><\/div>\n

The largest properties underway in the first quarter were a pair of office buildings comprising the Second Century Project in Burbank\u2014measuring 355,000 and 445,000 square feet. Worthe Real Estate developed the property<\/a><\/strong> for Warner Brothers<\/strong>. The project was completed this month and is set to house 4,500 employees.<\/p>\n

Another significant project is underway in North Hollywood\u2014NBCUniversal <\/strong>is constructing a new campus, set to include 315,000 square feet of office space. The development broke ground in 2021 and is expected to come online later this year.<\/p>\n

During the first quarter, three office properties came online in the market, totaling 214,849 square feet. Year-over-year, completions were down significantly from 2022\u2019s first quarter, when nearly 2 million square feet of space was brought online.<\/p>\n

The largest property completed in the first quarter was The Wrapper Tower in Culver City, developed by Samitaur Constructs<\/strong>. Eric Owen Moss Architects<\/strong> designed the 180,000-square-foot, 17-story tower, which is also being marketed as offering creative office space.<\/p>\n

Office vacancy still a concern<\/h2>\n

Office vacancy in Los Angeles stood at 14.7 percent as of March, up 10 basis points month-over-month, and 200 basis points below the national average. Year-over-year, vacancy increased by 110 basis points.<\/p>\n

\"\"<\/a>

5750 Wilshire Blvd. Image courtesy of Cushman & Wakefield<\/em><\/p><\/div>\n

Several large office leases were completed in the first quarter, highlighting the strength of Los Angeles\u2019 creative office segment. In February, Sony Pictures Entertainment<\/strong> agreed to a long-term lease at Onni Group<\/strong>\u2019s 5750 Wilshire Blvd<\/a>. The company will occupy 225,239 square feet across multiple floors of the Class A office building.<\/p>\n

Another large lease was Ares Management\u2019s 206,000-square-foot agreement<\/a><\/strong> in Century City. The company signed a 12-year lease at 1800 and 1900 Avenue of the Stars, which is currently undergoing a $100 million renovation. Ares expects to move in after the upgrades are completed, in 2024.<\/p>\n

Los Angeles\u2019 full-service equivalent listing rate stood at $42.4 as of March, 10.9 percent higher than the national average, and up 0.8 percent year-over-year.<\/p>\n

Office investments slow down<\/h2>\n

Nationwide office sales for the first quarter diminished from the previous year\u2019s performance. At $6.5 billion, sales volume was only a third of the amount recorded in 2022\u2019s first quarter. Los Angeles followed this pattern as well, with $343 million in office sales during the first three months\u2014down 65.6 percent year-over-year.<\/p>\n

The average price per square foot for these sales stood at $196 as of March, down 49.4 percent from 2022, and on the same level with the national average.<\/p>\n

\"Union<\/a>

Union Bank Plaza. Image courtesy of KBS<\/em><\/p><\/div>\n

Waterbridge Capital <\/strong>closed on the largest sale of the quarter, the $104 million transaction of Union Bank Plaza<\/a> in downtown Los Angeles. The Class A building was the last asset in the portfolio of KBS Real Estate Investment Trust II<\/strong>. The new owner financed the purchase with a $75 million loan, provided by BH Properties.<\/strong><\/p>\n

Coworking solutions expand<\/h2>\n

As of March, Los Angeles\u2019 coworking segment accounted for 2.2 percent of its total office inventory.<\/p>\n

When compared to other metros, Los Angeles sits in the top half for how much shared space it has to offer. Manhattan is one of the largest from this perspective, with 2.8 percent of office space as coworking space (13.5 million square feet allocated).<\/p>\n

Los Angeles is on track to retain its spot as one of the top metros for coworking companies. Last year, WeWork <\/strong>launched a global return-to-work initiative<\/a>, teaming up with 11 cities and organizations, including Los Angeles. The program aims to incentivize local businesses to develop hybrid solutions, while the company will provide data and key insights into the needs of workers.<\/p>\n","protected":false},"excerpt":{"rendered":"

Read our latest Q1 Los Angeles office market update, based on CommercialEdge data.<\/p>\n","protected":false},"author":1284,"featured_media":1004606319,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21782,21783,1594,21747,15],"tags":[51047,50674],"class_list":["post-1004663357","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-development","category-investment","category-los-angeles","category-office","category-west","tag-marketupdate","tag-commercialedge"],"acf":[],"yoast_head":"\nLos Angeles' Office Market Q1 Performance<\/title>\n<meta name=\"description\" content=\"Los Angeles' office market fundamentals did not improve in the first quarter, the latest CommercialEdge data shows.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, 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