LA Brokers Say Market Has Hit Bottom As Office Investment Doubles

With $1.8B in office investment sales in the first half of the year, many in the Los Angeles market have declared that the market has reached the bottom and now has nowhere to go but up.

The second-quarter sales total more than doubled the figure in the same period last year. There were $467.7M in office sales in Q2 2024, while Q2 2025 sales totaled nearly $1.2B. The surge was boosted by five transactions over $100M, according to a Newmark report. 

“Now we are at a place where there are plenty of market comparables,” Colliers U.S. Southwest Head of Capital Markets Sean Fulp said. “Whether it's in a specific market or an adjacent market, there's enough information for even institutional investors now to start to assess the trajectory of the market.”

More comparables in the market, distressed properties running out of road and shifting investor sentiment about the asset class are all fueling the increase and propelling the market toward recovery, office sales professionals said. 

The increase in comparables has meant there is now a fair amount of data about sales, giving buyers and sellers alike their bearings.

“The absence of data points a year or two ago was one of the barriers to transacting, I think,” Newmark co-Head of U.S. Capital Markets Kevin Shannon said. “There's more transparency right now on where pricing is because of the increase in the comps.” 

Many of those comparables have come from buyers finding deals too good to pass up.

The impacts of hybrid work and higher borrowing costs have continued to exert pressure on office leasing activity. Some of those lower-occupancy buildings have loans with looming maturity dates and have faced pressure to sell, Newmark Head of Southwest Research Dain Fedora said. 

Office market distress only increased in the second quarter, Newmark found. That has translated into more opportunities for buyers waiting to seize them. 

“Most of today’s active office investors are targeting desirable, overleveraged buildings available at significantly reduced prices,” Fedora said in an email. 

“This strategy allows them to reset debt payments and offer competitive rents to attract tenants.” 

As of the midyear mark, 47% of the LA office market’s inventory was “economically unviable,” or unable to service its debt with the income it generated, the Newmark report says. 

Newmark’s numbers take into account the segment of the region’s office inventory with an occupancy rate below 70%, a point below which there are struggles to reach positive net operating income, Fedora said. 

This can also push more buildings to market, as these buildings are especially likely to face challenges when trying to refinance debt, meaning the most attractive option is usually a sale. 

That chain of events takes time to work itself out. 

“We're just [now] kind of cycling through some of the deals that have been distressed for more than a year or two,” Fulp said. 

With the overall office market still at about 25% vacancy, by Newmark’s count, and no real increases in absorption, Fulp anticipates that the next three to five years will be spent working through a steady stream of distressed assets moving through this process. 

There is also a broadening group of would-be buyers returning to the asset class. Private buyers have been the driving force behind office building sales, and they remain so, making up roughly two-thirds of the buyers of offices in 2025 to date, according to Newmark research. 

But REITs have been buyers in more sales this year to date than in all of 2024, Newmark found, and anecdotally, institutional investors are also resuming interest in office properties. 

“The REITs are starting to play offense,” Shannon said, adding that the further along the market gets into its purported recovery, the more comfortable institutional capital will feel wading back in.

However, in the right markets and for the right properties, they are already back. He pointed to the recent sale of a Playa Vista office building to Barings for $151M. 

“If you have a Class-A building and a good submarket, you will see institutional capital,” Shannon said.