Southern California Office Vacancy Rate Rises To 20.4%

In a surprising revelation, recent leasing figures from Cushman & Wakefield indicate that the commercial real estate landscape in Southern California is facing an unsettling reality. With a staggering vacancy rate of 20.4 percent, approximately one out of every five offices across the five-county region remains unoccupied. This translates to a whopping 81 million square feet of empty office space out of the total 398 million square feet available, leaving investors and property owners grappling with a surplus of underutilized properties.

A Changing Landscape: Southern California's Office Space Challenges

Southern California finds itself grappling with an unprecedented situation in its real estate market. Astonishingly, the amount of empty office space in this region could fill a staggering 58 U.S. Bank Towers. This iconic 72-story skyscraper, nestled in the heart of Downtown Los Angeles and spanning 1.4 million square feet, stands as a striking symbol of the abundance of available office space.

Yet, it is essential to note that these empty offices existed even before the pandemic upended the traditional work landscape. As of the end of 2019, Southern California was burdened with a whopping 41 million square feet of vacant office space, leading to a concerning vacancy rate of 13 percent.

In the face of this vacancy crisis, local office landlords valiantly attempted to alleviate the situation by leasing 20 million square feet of office space to new tenants last year. However, their commendable efforts fell short by 7 million square feet. The exodus of companies from their office spaces added more supply to the market than what could be absorbed by new tenants.

Office Vacancy Rates Surge in Los Angeles County

Los Angeles County is grappling with a concerning surge in office vacancy rates, with a staggering 51 million square feet of empty office space, representing a vacancy rate of 24 percent. This data, gathered by real estate services firm Cushman & Wakefield, underscores the significant challenges faced by property owners and real estate developers across the region.

Delving into the specific areas within the metro region, it becomes evident that the situation is equally dire. West L.A. and Downtown central L.A. offices exhibit a distressing vacancy rate of 26 percent, closely followed by Downtown non-central L.A. at 33 percent. The Mid-Wilshire area is not far behind, with an alarming 30 percent vacancy rate. The L.A. south, L.A. tri-cities, L.A. north, and the San Gabriel Valley are also dealing with high vacancy rates of 23 percent, 22 percent, 21 percent, and 10 percent, respectively, according to the year-end report from Cushman & Wakefield.

Orange County, too, has witnessed a substantial number of empty offices, amounting to a total of 18 million square feet and a 19.6 percent vacancy rate. Key areas affected include the John Wayne Airport area, Central OC, South OC, West OC, and North OC, with vacancy rates of 20 percent, 20 percent, 20 percent, 19 percent, and 16 percent, respectively. The situation in Orange County is indicative of a broader trend across the region.

Thriving Office Market in Southern California

San Diego County and the Inland Empire are experiencing contrasting trends in their office real estate markets. While San Diego County has a significant vacancy rate of 14.5 percent, equivalent to 10 million square feet of empty office space, the Inland Empire boasts a more resilient market with a vacancy rate of 9.5 percent, translating to 2 million square feet. Renowned real estate firm Cushman & Wakefield, in their recent report, emphasized the Inland Empire's ability to cater primarily to local businesses, thus minimizing the impact of remote work and hybrid schedules. This unique customer base has helped maintain robust market fundamentals in the region, distinguishing it from neighboring markets.