“The Los Angelesoffice area has emerging supply-side issues,” according toDoug Ressler of Yardi CommercialCafé, but the market has a swelling construction pipelinethat could oversupply the market. New research from Commercial Caféon office construction shows that 2.9 million square feet of newoffice product will deliver this year, and 2.5 million square feetis scheduled to deliver in the second half of the year. With aconstruction pipeline of this size, Los Angeles ranks11^th in the country and third on the West Coast foroffice construction. This new supply could prove to test demandinstead of satisfy it.

“The new supply will test the strength of tenant demand,”Ressler, director of business intelligence atYardi-Matrix tells GlobeSt.com. “This will beespecially true in tech and co-working firms. Los Angeles midtownhas typically been a low vacancy/high demand markets; however,there is pressure on this model as large leasing, defined as 50,000square feet-plus, has slowed and renewal rates are softening.”

The new office construction is largely redevelopment projects,rather than ground up construction. Additionally, there is agrowing number of public projects. “We see much of the officepipeline focused on repurpose of existing structures with newsupply shrinking,” says Ressler. “Many of the major public-sectorprojects in Los Angeles County are focused on upgrading agingfacilities or preparing the County to host the 2028 Olympics. Thereis a longer-term ten-year effort with multiple public agencies andinstitutions. As of June 2018, there are nearly 20 majorpublic-sector/institutional projects or programs in thepipeline.”