LA Office Sales Shake Off Stagnant Leasing Market, Beat 2021 Totals
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Los Angeles' office market clocked a gloomy year for leasing, like nearly every major city across the country, but despite the dour fundamentals, investment sales volume was up in 2022 when compared to the previous year.
A fourth-quarter report from Avison Young looking at Los Angeles’ office market found that investment sales volume increased in 2022 by 10.4% when compared to 2021. Total sales volume in 2021 was $3.38B. In 2022, it rose to $3.73B.
There were 149 office sales in 2022, the vast majority of them Class-B office properties, according to Avison Young.
That number represents a drop from 2021’s 162 sales, though the price per SF in 2022 increased year-over-year by 22.6% to $461.94.
“2023 will be the ‘year of expectation adjustment,'” Avison Young principal and Managing Director for Southern California Christopher Cooper said in a statement. “This will include how occupiers will use office space; how we close the investment sales pricing gap between the bid and ask; how and when the debt markets will return to the table; and how we repurpose underutilized office assets into multifamily solutions. All of these factors will define the agenda for 2023 and likely for many years thereafter.”
Not surprisingly, the overall report painted a picture of a market still very much struggling to regain losses sustained from the pandemic and reflected at least some doubt about how much of a rebound could even be achieved.
The AY report pegged total vacancy at 16.3%, a new record high, and total availability at 19.9%. Rental rates in 2022 were up slightly (0.94%) over 2021’s, hitting $40.76 per SF annually, but rental rate growth is largely coming from the fact that landlords are still being “aggressive” with concessions, the report said.
Leasing activity was more active in 2022 than in 2021, but total square footage decreased more than 2%, suggesting that 2022’s leases were smaller than 2021’s, the authors of AY’s report wrote.