Is the Los Angeles Office Market Slowing Down?

Is the Los Angeles Office Market Slowing Down?

Experts say that there is a slow down happening in the U.S. office market right now. The labor market is crowded and now there’s a flood of new developments coming online, both adding to the slowing office market. But in California, the office market is expected to keep growing.

First of all, the tech sector continues to outpace all other office leasing, making up a fifth of all leasing activity for the last few years. With tech seeing more than double the job growth as the national average, the Bay Area is one region that is keeping office afloat, but that’s not the only place. The Los Angeles office market is also holding steady for several reasons.

L.A. Market is Holding Steady

There is a slowdown happening and it’s hitting older, office spaces that lack amenities and the infrastructure necessary to support advanced building technology. According to CBRE, over the course of this year, we’ll continue to see office slow into a complete “economic slowdown” next year.

JLL noted that demand for deliveries is going to push vacancies up in SoCal, “one-off transactions” will continue to push the volume numbers up for office, and investors from around the country and the globe are flooding the market with cash.

Orange County saw a more than 10% increase in job growth in the tech industry while L.A.’s tech jobs increased by more than 12% and San Francisco along with Seattle ranked the highest in the country for tech job market growth. The dark cloud on the horizon for L.A. is the increasing rent prices – the same ones pushing investors out of primary markets and into secondary and tertiary ones:

  •      LA: $42.72
  •      Oakland/East Bay: $46.44
  •      Sacramento: $24.00
  •      San Francisco: $76.28
  •      San Francisco Peninsula: $64.80
  •      San Diego: $35.64
  •      Silicon Valley: $47.52

Despite these rent increases, Los Angeles and surrounding areas have an edge over most other places. It’s not just the climate and the entertainment. It is also the fact that L.A. has done a lot to revamp its public transportation systems and revitalize its downtown increasing the city’s walkability and filling retail, office, and multifamily with lots and lots of amenities and technology – all of the things that modern offices need and investors are seeking out.

State of the National Office Market

Compared to the rest of the country, California overall is beating the national average by leaps and bounds. Overall, GDP growth has slipped a little and consumer spending has fallen to a five year low. Additionally, the GOP tax cut bill which was supposed to give a boost to the economy by trickling money down from “corporations and the wealthy” yet polls consistently show little to no increase in employee paychecks.

On top of that, the near-term forecast by the Congressional Budget Office has said that the tax bill will burst through the debt ceiling before the year is out, add a billion dollar deficit to the budget this year, and will add a trillion dollars to the national debt over the next decade. All things that created the last collapse and could have a detrimental effect on overall market growth over the next year.

By |2018-10-23T14:40:06+00:00August 9th, 2018|