Los Angeles Commercial Real Estate Market: Q3 2024 Overview
Los Angeles' commercial real estate market is seeing significant shifts across office, multifamily, retail, and industrial sectors. Below is a breakdown of key data and what it means for the market.
Multifamily Market
Key Data (Q3 2024 vs. Q3 2023)
Vacancy Rate: 0.7% (up from 0.6%)
Market Asking Rent: $2,266 (down from $2,282)
Market Effective Rent: $2,284 (down from $2,298)
Absorption (12 months): 3,661 units (down from 8,373)
New Deliveries (12 months): 3,265 units (up from 2,010)
Market Cap Rate: 4.7% (down from 5.0%)
Market Analysis
The multifamily market is losing momentum as rental growth slows and vacancies tick up slightly. The slight drop in rental rates indicates that landlords are adjusting pricing to keep units occupied. The increase in new apartment deliveries (3,265 units added in the last 12 months) is putting pressure on rents, creating a more tenant-friendly market.
Office Market
Key Data (Q3 2024 vs. Q3 2023)
Vacancy Rate: 15.0% (down from 16.1%)
Market Rent: $42 per SF (unchanged)
Net Absorption: -4.18 million SF (vs. -5.25 million SF)
Sales Volume: $546.97 million (down from $610.90 million)
Market Cap Rate: 6.8% (down from 7.5%)
Market Analysis
Los Angeles' office market remains weak as high vacancy rates and negative net absorption persist. While vacancy rates have improved slightly, the sector is still struggling to attract tenants, largely due to remote work (15% of LA's workforce still teleworks). The drop in sales volume suggests that investors are less confident in the office sector, likely waiting for a pricing adjustment before reentering the market.
Retail Market
Key Data (Q3 2024 vs. Q3 2023)
Vacancy Rate: 2.3% (up from 0.0%)
Market Rent: $37 per SF (unchanged)
Net Absorption: -830,927 SF (vs. -1.81 million SF)
Sales Volume: $779.28 million (up from $656.69 million)
Market Cap Rate: 5.4% (down from 5.5%)
Market Analysis
The retail market is showing mixed signals. On one hand, vacancy rates are rising, reflecting weaker demand for retail spaces. On the other hand, total sales volume has increased to $779.28 million, suggesting that investors still see value in retail assets despite demand concerns. The flat rent growth means landlords are prioritizing leasing spaces rather than increasing rents.
Industrial Market
Key Data (Q3 2024 vs. Q3 2023)
Vacancy Rate: 6.4% (up from -3.4%)
Market Rent: $19 per SF (up from $18)
Net Absorption: -14.67 million SF (vs. -11.30 million SF)
Sales Volume: $1.55 billion (up from $732 million)
Market Cap Rate: 4.8% (down from 5.3%)
Market Analysis
After years of booming industrial growth, the sector is cooling down. Vacancies are rising, and net absorption is deep in the red, indicating that more space is being vacated than leased. However, sales volume has more than doubled, suggesting that investors still view industrial properties as a strong long-term bet. The modest increase in rent ($19 per SF, up from $18) reflects landlords trying to maintain pricing despite weaker demand.
Conclusion:
The Los Angeles commercial real estate market is experiencing shifts in demand across all sectors.
Multifamily remains stable but is seeing slower rent growth and higher deliveries.
Office space is still struggling, with high vacancy rates and weak demand due to remote work trends.
Retail is showing resilience in investment activity but facing higher vacancies.
Industrial properties, after years of strong growth, are seeing more vacancies but remain a key investment target.
For investors, strategic opportunities exist—particularly in multifamily and industrial, where demand shifts are leading to potential pricing adjustments. Meanwhile, retail and office landlords may need to adapt their leasing strategies to compete in an evolving market. This data comes from the latest National Association of Realtors (NAR) quarterly report. If you’re buying or selling commercial property, contact us.