Vacancy Rates Grow in DTLA

Carol Schatz is the president and CEO of the DCBID.

The Downtown Los Angeles market closed 2017 with a whimper. The market—which experienced a phenomenal year—saw vacancy rates increase in office and retail asset classes. Office vacancy rates increased 5.4% to 17.7%, and retail vacancy was up 9.8% to a rate of 4.5%, according to the fourth quarter report from the DCBID. Occupancy rates in hospitality market remained flat, while multifamily occupancy rates climbed 1% amid significant new development. While vacancy rates fell, absorption for both office and retail markets was positive, and office continued to see increases in rental rates.

Office has been a key asset class for the downtown market to capture, but the vacancy rate has remained high. It isn’t unusual that vacancy rates bumped up in the fourth quarter considering that the whole of L.A. saw an office slowdown at the end of the year, including the Westside market, a typical driver for Los Angeles office. Overall, the office sector in the Downtown market performed well for 2017. “We feel the DTLA office market had a pretty good year in 2017,” Carol Schatz, president of the DCBID, tells GlobeSt.com. “Rates are up, vacancies are down, and leasing activity was up 10% over 2016. More importantly, all of this occurred while new creative office spaces opened throughout downtown. DTLA now boasts one of the most diverse office portfolio’s in Southern California and stands to benefit from all of the exciting new projects still to deliver.  If Warner Music Group’s move to DTLA from Hollywood and Jerde Partnership’s move from Santa Monica are any indication, the DTLA office market outlook is bright indeed.”