Moderately growing job market
Los Angeles nonfarm employment increased by 43,500 jobs over the past three months. The labor market continues to grow despite high interest rates. As of May 2024, the Los Angeles unemployment rate is 5.2%, and the national unemployment rate is 4%. During the June Federal Reserve meeting, the Fed unanimously voted to hold policy rates steady for the seventh consecutive time, leaving the Fed Funds Target Rate unchanged at 5.25% to 5.50%. The Fed is still expecting to cut rates at some point in 2024.
Availability is at an all-time high
Net absorption regressed for the eighth consecutive quarter, at negative 525,952 SF. West LA and South Bay had the most negative net absorption. Entertainment and tech firms, key tenancies of the office market, have seen job losses over the past year.
Leasing will be driven by financial services, law, and real estate sectors. Los Angeles leasing activity will remain slow due to high interest rates and the resulting slower overall economic activity. Occupiers will continue to downsize and seek high-quality space in the latter half of 2024.
Capital markets activity picked up
Q2 2024 saw $223 million of sales volume, a 9.8% increase from Q1 2024 but 77% below the five-year quarterly average. Market weakness and questions around the future trajectory for office space have damaged investor demand.
Sales activity in the metro is driven by owner/users and private buyers. The current market conditions provide these buyers with leverage and opportunities to acquire quality properties at attractive prices.
