Major office markets across the country are finally seeing improvement after pandemic-era lockdowns and remote work caused vacancies to skyrocket. The road back is still long, but promising signs are popping up on both coasts and for the country’s office stock on average.
But in Los Angeles, drooping demand and a sluggish economy have combined to keep the city’s office market frozen in its pandemic-era malaise.
“I think we’ve probably hit a plateau,” NAI Capital Managing Director of Research J.C. Casillas said. “At some point, we’re going to start seeing more consistent absorption of vacated space. It’s just going to take time and it’s going to have to be organic growth that drives the market.”
Los Angeles’ office market is looking at 679K SF of negative absorption and a vacancy rate over 24%, according to CBRE. Greater LA vacancy has been about 20% since 2022 and hovering around 25% for approximately the last two years. Nationwide, the office vacancy rate is still 22.5%, but it decreased last quarter for the first time since 2019.
In LA, it keeps creeping up, though the increases have slowed.
While AI has swooped in to reinvigorate San Francisco’s office market, Los Angeles is still waiting on its office savior.
A hero may be hard to find, given the region and state’s challenged economy. Unemployment in the Los Angeles metro was 6.3% as of August. The San Francisco metro area, by comparison, was 4.8% in the same period.
Prior to the pandemic, Los Angeles experienced a boom in office leasing from tech and media tenants taking full-building leases for under-construction properties. But these same tenants have receded since the pandemic, with those companies cutting back on real estate and conducting rounds of layoffs.
Tech employment hit its peak in 2022 and has since declined by almost 17% in greater LA, according to the Urban Land Institute and PwC Emerging Trends in Real Estate report.
Real estate sentiment generally about LA fell this year too. Los Angeles fell 10 spots from 2024 to No. 44 on the ULI and PwC list of primary markets, the report’s ranking of cities evaluated based on overall real estate prospects. The fall was “the most notable downward movement among Primary Markets.”
“Media, technology — those industries have slowed, so we have not, at least in Los Angeles, had the historical growth that has driven a lot of the office market,” CBRE Vice Chairman Jeff Pion said.
He added that he is optimistic about 2026 and that LA’s position as a laggard will improve.
One bright spot that could portend further improvements is the decline in sublease space available. After the lockdown era of the pandemic, sublease space soared as companies grappled with remote and hybrid work and negotiated their long-term approaches to office space.
By Colliers’ count, sublease space fell 30 bps to 3.7%, the fifth consecutive quarter of decline. CBRE found total sublease availability dropped to 9.3M SF in the third quarter, a 14.4% decrease from a year ago.
Some sectors of office users are figuring out that they actually need the space they put on the sublease market and are taking it back, Pion said.
However, it will take more than a pullback in sublease space to reboot the LA office market. If new demand drivers don’t present themselves, then the only way office vacancy is going to decrease is through conversions or demolitions.
Even some new, trophy office space lingers on the market. NAI Capital found that 30.5% of space delivered since 2020 is vacant.
“At the end of the day, we are still overofficed,” Colliers West Region Research Director Michael Soto said. “There are a lot of office buildings still out there that either need to be converted or demolished.”