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Q4 2025

Q4 2025

Los Angeles Commercial Real Estate Market Report

Focus: Q4 2025 Market Trends

Executive Summary

The Los Angeles commercial real estate (CRE) market is characterized by bifurcation, with resilient logistics fundamentals contrasting sharply with the challenged office sector [1]. Investor caution persists due to high interest rates, though a strong rebound in industrial leasing activity in Q3 2025 suggests stabilization may be nearing [1, 7]. Employment growth is modest at 0.7% year-over-year (YOY) [2.3], though the Ports of LA and Long Beach show strong container volume [7].

TenantBase Proprietary Data [20] highlights the distribution of active tenant demand over the last 90 days (630 total deals): Retail/Storefront dominated with 50.48% of all searches, Warehouse was the second most active sector at 33.81%, and Office accounted for 16.03% [20].

Office Market

Market Overview

The LA office market remains under significant pressure, marked by the twelfth consecutive quarter of negative net absorption [2]. The ongoing shift to hybrid work continues to fuel the "flight to quality," with trophy assets severely outperforming all other classes [1, 2].

Vacancy & Availability: The overall direct vacancy rate was 24.5% in Q1 2025 [1.3], while total availability was roughly 28.4% [1.3]. Downtown LA remains highly challenged, with direct vacancy above 31% and total availability reportedly over 35% [1.3]. Total metro vacancy settled at 25.2% [1.1], or 24.1% [1.2], in Q3 2025 [1.1, 1.2].
Net Absorption: Net absorption remains highly negative, with a year-to-date (YTD) loss of -638,000 SF through Q1 2025 [1.3].
Leasing Activity: Leasing volume totaled just 1.4 million SF in Q2 2025, a sharp 50% drop quarter-over-quarter (QOQ) [1.2].
Rental Rates: Average asking rents have stayed relatively flat, averaging about $3.60 per SF per month (FSG) [1.3]. This stability is due to landlords maintaining face rates while offering concessions [1.3].
Sublease Space: Sublet availability dropped by over 1.2 million SF during Q3 2025 [1.1], reaching its lowest amount of space since 2020 [1.1].

TenantBase Activity [20]

Demand Share: Office accounted for 16.03% (101 deals) of total search volume [20].
Lease Term Preference: Tenant demand shows polarization toward extreme short-term leases [20]:
- Less than one year: 39.71% of deals.
- 2-3 Years: 25.00% of deals.
- 5+ Years: 13.24% of deals.
- 3-5 Years: 13.24% of deals.
Size Requirements: Smaller spaces are preferred for short commitments. The average lower SF required for a Less than one year term is 727 SF [20, 217].

Industrial & Warehouse Market

Market Overview

The LA industrial market is shifting toward stabilization, supported by record leasing velocity [7] and constrained new supply due to its infill nature [7, 9].

Vacancy & Rent: The overall vacancy rate reached 4.8% in Q2 2025 [2.3]. This is the highest level seen in the past decade [2.3]. The overall average asking rent dropped by 10.2% YOY to $1.34 per SF (NNN) per month [2.3]. Rents are expected to fall approximately 0.9% in 2025 before stabilizing and improving in 2026 [2.3].
Net Absorption: Q2 2025 reported negative net absorption [2.3], continuing a negative trend for 11 consecutive quarters up to the close of 2024 [2.5].
Leasing Activity: New leasing activity in Q2 2025 totaled over 7.6 million SF [2.3]. Year-to-date leasing in 2025 is over 16.2 million SF, the highest velocity through the first half of a year since 2021 [2.3].
Supply Pipeline: The construction pipeline is modest, with only 4.0 million SF under construction [7], which is a key factor supporting the market's long-term stabilization [7].

TenantBase Activity [20]

Demand Share: Industrial/Warehouse accounted for 33.81% (213 deals) of total search volume [20].
Lease Term Preference: Flexibility is key, but demand for long-term space is present [20]:
- 1-2 Years: 36.84% of deals.
- 3-5 Years: 17.89% of deals.
- 5+ Years: 16.84% of deals.
Size Requirements: Longer terms command larger space. The average lower SF required for a 5+ Years term is 7,292 SF [20].

Retail Market

Market Overview

The LA retail market is facing mixed signals, with vacancy rising and rents declining despite the national retail market turning the corner in Q3 2025 [3.1, 3.4]. Retail rents in LA remain among the highest in the nation [15].

Vacancy & Availability: Retail vacancy increased to 5.7% in Q3 2025, up 40 basis points YOY [3.1]. Downtown Los Angeles recorded a high vacancy rate of 11.1% [3.5].
Net Absorption: Net absorption YTD was -1.49 million SF in Q3 2025 [3.1], though this was an improvement from the prior year [3.1].
Rental Rates: Average asking rent dropped to $2.82/SF, a 4.86% decrease from Q3 2024 [3.1]. However, rents in the urban core average $36.63 per SF [15].
Construction: The construction pipeline is severely constrained at 597,609 SF [3.1], representing only 0.1% of total inventory [15].

TenantBase Activity [20]

Demand Share: Retail/Storefront activity dominated with 50.48% (318 deals) of total search volume [20].
Lease Term Preference: Retail tenants show a preference for stability [20]:
- 3-5 Years: 30.08% of deals.
- 5+ Years: 25.56% of deals.
- 2-3 Years: 18.80% of deals.
Top Locations: Tenant interest is highly concentrated in the core submarkets [20, 248]:
- Los Angeles (Core): 67 deals.
- Northwest LA/San Fernando Valley: 53 deals.
- West LA: 35 deals.

Multifamily Market

Market Overview

Los Angeles's multifamily market is characterized by high, persistent renter demand, driven by the substantial cost-to-buy premium [16]. The market is benefiting from a measured completion schedule [18].

Vacancy & Occupancy: The average occupancy rate remained unchanged YOY at 96.0% as of August 2025 [17]. Vacancy rates are projected to decline further to 4.9% by year-end 2025 [16, 18].
Rents & Concessions: The average advertised asking rent was flat QOQ through September at $2,646 [17]. Average annual rent growth is forecast to accelerate to 2.6% by year-end 2025 [16].
Cost-to-Buy Premium: LA has one of the highest cost-to-buy premiums in the country, with buying a home projected to be more than 2.5 times the average rent in 2025 [16].
Construction: Approximately 25,700 apartments were under construction as of September 2025 [17]. Multifamily construction starts are expected to be 74% below their 2021 peak by mid-2025 [16].

Sources

Information in this report is aggregated from various third-party sources and synthesized using artificial intelligence and other research tools. While we believe these sources to be reliable, we cannot guarantee the absolute accuracy or completeness of the data. This report is intended for informational purposes to provide market insight and should be independently verified prior to any use in a real estate transaction or legal commitment.

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Los Angeles Commercial Office Space for Rent

Home > Los Angeles > Q4 2025

Q4 2025

Los Angeles Commercial Real Estate Market Report

Focus: Q4 2025 Market Trends

Executive Summary

Office Market

Industrial & Warehouse Market

Retail Market

Multifamily Market

Sources

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Q4 2025