Nearing 20% Vacancy
An additional 3.2M SF of leasing activity in Q4 brought the 2021 annual total to 12.6M SF. This is 36.2% more than the 9.3M SF recorded in 2020, but still much lower than the 18.5M SF in 2019 when the pre-pandemic quarterly average was 4.6M SF. Several significant leases over 100,000 SF were signed in Q4 as entertainment and media giants secured new buildings in West Los Angeles and retailers decide to relocate to a large redevelopment in the Fashion District. The total availability rate, which includes vacant and occupied space for lease, remains elevated at 24.6%. Available space remained relatively unchanged over the quarter compared to the swift runup that started in Q1 2019. Net absorption was positive 511,305 SF in Q4, snapping the six-quarter negative streak and decreasing the overall vacancy rate by 10 basis points to 19.7%. Despite this, new COVID-19 variants kept workers out of the office and prolonged recovery, which is expected to keep vacancy high. Approximately 78% of the development pipeline containing 4.8M SF of new construction and major renovations have a target delivery in 2022. This is expected to cause Los Angeles office vacancy to reach 20% in the foreseeable future. Landlords held their rates and chose to be more generous with concessions which kept the average asking rent flat over the quarter at $3.72 PSF per month.