As 2025 begins, Downtown Los Angeles is seeing a mix of encouraging and disappointing trends across its commercial real estate market. According to a new report from the DTLA Alliance, which examined first-quarter performance in retail, hotel, office, and residential sectors, the city's core is experiencing varied results across these key asset classes.
What stood out the most was the retail sector's 250 basis point spike in the vacancy rate to 9.5 percent compared to the previous three months. DTLA attributed much of this trend to the shuttering of a Macy's store at The Blog shopping center. Meanwhile, office continues to struggle to lure employees back to in-person work since habits changed during the pandemic, as vacancy went from 28.8 percent to 31.1 percent.
"Lingering uncertainty about return-to-work was felt across the region, with vacancy rates reaching a historic high in 2024 and remaining at that level for Q1 2025," DLTA further explained.
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Vacancy moved in a positive direction across the residential and hotel segments, with occupancy improving by 70 basis points and a full percentage point, respectively.
Many other categories showed little change. This is particularly the case with rents, as residential declined by two cents per square foot to $3.38, office went down by one cent to $3.81, while retail rents remained flat at $3.22. Average Daily Rates for hotels year-to-date through the first quarter improved to $221.68 compared with $217.53 at the end of last year. From a RevPAR perspective, the number was $154.21 in the first quarter, up from the $149.24 posted at the end of 2024.
Only retail and office showed net absorption figures. Office experienced an impressive 180, producing a positive 617,905 square feet compared with -601,085 square feet posted last quarter. However, the narrative for retail was different, as negative net absorption widened to -129,861 square feet, up from -90,032 square feet.
Office leasing rose to 429,566 square feet compared with 396,729 square feet in the fourth quarter. Dentons secured the largest deal, with its 62,383-square-foot renewal at 601 S. Figueroa St. It was followed by West Monroe and Burke, Williams & Sorenson, which both secured deals for over 24,000 square feet in Downtown LA.
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