Rise in Sublease Availabilities This Quarter Has Been Moderate
Sublease space in the Los Angeles office market remains at record levels. However, the rise in availabilities so far this quarter has been much more modest than in recent quarters.
Presently 10.4 million square feet of sublease space is listed in Los Angeles County, up 95% since the onset of the pandemic last year. Whereas the square footage of sublease availabilities increased by 1 million square feet during the first quarter of this year, sublease availabilities are up just 200,000 square feet late in the second quarter.
While it will take time for the market to digest the record levels of sublease space currently on the market, availabilities appear to have either peaked or will likely soon peak. Westside locations such as Santa Monica, Marina Del Rey/Venice, Culver City and Hollywood continue to stand out for elevated levels. These areas were considered some of the hottest office submarkets prior to the pandemic, as they are favorites among Los Angeles’ most innovative industries, tech firms and media companies.
For the market to truly heal, sublease space needs to come down. Sublease space usually offers a discount to prospective tenants, given the inability, typically, of tenants to negotiate on lease terms and tenant buildouts. This can add competition to the direct space landlords need to lease.
Author Credit: Ryan Patap, CoStar Analytics