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GREATER LOS ANGELES MARKETFLASH
LA's Office Re-Entry Slows Despite Signs of Strength in Demand
AUGUST 24, 2021

•In-person office occupancy in LA has fallen from 30% in early July to 27.7% in August as weekly new COVID-19 cases rise again.

•Office leasing activity for June 2021 in LA was 40% above pre-pandemic levels and well above the national average; indicating strong interest in the market despite the pandemic.

•Available sublease space is 68% above pre-pandemic levels, but the pace of new listings has slowed in Q2 2021, and the overall amount is lower than other major metros and the U.S. average.

After California embraced a widespread reopening in the summer, the increasing prevalence of the Delta variant has introduced new uncertainty for regional occupiers’ return to work plans. According to Kastle Systems, which measures the number of times keycards and fobs are used by employees to enter an office space, LA office occupancy had climbed 900 basis points from its lowest level in January 2021 to 30% in early July. Since then, the climb in physical occupancy rates has reversed. As of Aug. 18, LA’s office occupancy stands at 27.7%, a 200 bps decline from just the month prior. Looking at the same period the year before shows that fewer people are heading back in LA—a stark contrast compared to other major metros across the county. In metros where social distancing guidelines are less stringent, such as Houston, Dallas-Fort Worth, and Austin, office occupancy has risen back to over 46%.
Data from Kastle Systems showed the number of people coming back to the office in LA was gradually increasing over the summer, but new COVID cases threaten to dampen the return to in-person work.
Source: CDC; Kastle Systems; CBRE Research, 2021.
LA lags behind other major metros in employees returning to the office, especially compared to last year.
Source: Kastle Systems; CBRE Research, 2021.

Despite near-term trends, occupier demand has demonstrated a robust rebound, particularly compared with other major metro areas. According to CBRE’s Pulse on U.S. Office Demand, LA and Boston stand out as the two markets in the strongest position of growth in 2021. In fact, leasing activity in LA as of June 2021 was 40% above pre-pandemic levels (2018 / 2019 average) and well-above the national average. Leasing activity across the region remains imbalanced with strong demand in submarkets like Culver City and Burbank that boast resilient content production-oriented tenants and highly-desired creative office space; meanwhile, submarkets like downtown and Century City have seen a more muted rebound in demand for traditional high-rise office space favored by finance and professional services tenants.
Though many have not returned to in-person work, the level of office leasing activity¹ in LA relative to pre-COVID was the highest in the nation in June 2021.

(1) Leasing activity includes all new leases, expansions and renewals of 10,000 sq. ft. or more that close each month. The Leasing Activity Index uses a rolling three-month average of leasing activity, weighted 50% for the current month, 30% for the previous month, and 20% for two months prior. The monthly figure is compared with a pre-pandemic baseline, which is the average leasing activity between 2018 and 2019. The Index level for the baseline has been set to 100.

Source: CBRE Research, 2021.
Available sublease space is 68% higher than pre-pandemic levels, but below other major metros and the national average.

(2) Sublease availability measures the total square footage of sublease space available for occupancy greater than 10,000 sq. ft. The Sublease Availability Index compares monthly sublease availability totals with a pre-pandemic baseline, which is the average amount of sublease space available in 2018 and 2019. The index level for the baseline has been set to 100.


Source: CBRE Research, 2021.
Contacts
Eric Willett
Research Director
CBRE Pacific Southwest Thought Leadership
+1 213 613 3274
eric.willett@cbre.com | LinkedIn
Dan Hunker
Research Analyst
CBRE Pacific Southwest Thought Leadership
+1 909 418 2117
dan.hunker@cbre.com | LinkedIn

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