L.A. Office Market Will Be "Challenged" in 2021

The Los Angeles office market is headed for a prolonged office recovery. A new report from Marcus & Millichap forecasts that office vacancy will grown 160 basis points this year to 18.5%, and office rents will fall 1.4% to $37.50 per square foot.

However, the stars are aligning for recovery. Los Angeles has done well in its vaccine distribution efforts and COVID-19 restrictions are waning across the market. As a result, the market can start down the long road to recovery; however, the pandemic has damaged the market. Many tenants have paused any expansion plans, and for tenants that had lease negotiations, many reduced their foot print, according to the report. The first quarter leasing was improved compared to the previous quarter, but most lease agreements were 10,000 square feet or less, showing a trend favoring smaller spaces.