The region's market has faced rising levels for years

September 18, 2024 | 7:56 AM

Elevated amounts of available sublet space continue to afflict the Los Angeles office market and are nearing the area's highest-ever levels.

Currently, 12.5 million square feet of sublease space is available for rent. That's about 15% of the market's available space and more than double the space available before the onset of the COVID-19 pandemic.

Of local office locations with the greatest percentage of available sublease space, the Woodland Hills/Warner Center ranks first, with just under 40% of its vacant space listed for sublease. In Woodland Hills and Los Angeles County, the two-building Farmers Insurance campus at 6301 and 6303 Owensmouth Ave. has the most available sublease space, with about 530,000 square feet on the market.

Among other major office locations, Marina Del Rey/Venice and Santa Monica — which comprise Silicon Beach and Los Angeles’ historic tech center — stand out, each with around 25% of its available space represented by sublease options. El Segundo, another tech hub, has 22% of its available sublease space listed.

Elevated sublease space often keeps landlords from raising rental rates, as sublessors usually offer space for less than the landlords. Sublessors are generally more concerned with recouping costs on unneeded space than landlords, who are more focused on maximizing profits at the building. Levels of available sublease space will need to decrease considerably for the market to meaningfully improve.

In the meantime, levels of available sublet space are a significant signal that market weakness will likely persist in Los Angeles, and CoStar does not forecast any improvement in tenant demand. Local economic softness, especially in the entertainment and tech sectors, will likely inhibit some office tenants from expanding. Additionally, the continuing popularity of hybrid work patterns suggests that occupiers could use less space per worker and shed excess space as their leases expire.