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Office availability reached a record-high 26.7% in the Los Angeles area to finish 2023, according to a new report from Savills.
Leasing activity in the final quarter of 2023 totaled just under 2.2M SF, down 28% from nearly 3M SF in the third quarter, Savills' year-end report says, while sublease figures rose slightly to 10.4M SF from 10.3M SF in the third quarter.
The San Gabriel Valley, Santa Clarita Valley and Century City submarkets had the lowest availability rates at 12.6%, 19.5% and 19.6%, respectively. Park Mile, roughly the stretch of Wilshire Boulevard between Highland Avenue and Wilton Place, had the highest availability at 43.5%.
Despite the dragging market, some large leases were executed in the third quarter. The biggest was the county of LA’s 207K SF lease in Long Beach, followed by law firm Sheppard Mullin’s 119K SF relocation in Downtown LA.
Government leases buoyed the activity in Q4, making up three of the top 10 leases by square footage. In addition to the county’s big Long Beach lease, the county executed leases in the San Gabriel Valley and Hollywood for 50K and 30K SF, respectively.
Office owners aren’t out of the woods in 2024, with more foreclosures and distressed sales expected amid higher costs to refinance, the report says.
There were some glimmers of hope. Although discretionary leasing was uncommon in 2023, there is some "cautious optimism" that the end of the writers and actors strikes could deliver a boost from entertainment and media tenants. Trends of both a flight to quality and a flight to capital are expected to persist if that demand does materialize, the report's authors wrote.
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