Why DTLA’s Office Vacancy Is Climbing

Nick Griffin is the SVP of economic development at the DCBID.

By most accounts, the Downtown Los Angeles office market is booming. Major companies are moving into the market, like Arup and Spotify; rental rates are up nearly 7%, up to $3.62 per square foot for class-A space; and leasing activity is up 25% year-over-year. Yet, office vacancy is rising. According to the DCBID second quarter report, office vacancy was up 3% year-over-year to 17.3%. With all of the other strong fundamentals, it is hard to understand what is driving vacancy rates up, but it isn’t offsetting the strong fundamentals in the market.

“Over the past several years, the DTLA office market has steadily, if quietly, grown stronger and more robust,” Nick Griffin, SVP of economic development at the DCBID, tells GlobeSt.com. “As our second quarter market report highlights, office rents are increasing along with both absorption and leasing activity.  The primary reason for the increase in vacancy is the delivery of new space to the market, both new, like The Wilshire Grand and At Mateo, and all of the older historic buildings, like ROW DTLA, The Ford Building, Broadway Trade Center, that are being converted into modern creative office environments. Many of these older buildings were no longer a part of the office inventory having been designated obsolete and/or classified previously as industrial or manufacturing space.  As these spaces continue to be converted and fill with creative and tech tenants, the net effect to the market is roughly zero.  DTLA is filling space that previously didn’t exist.”