LA Office Market Erases Several Years of Negative Absorption
Los Angeles' office market is showing early signs of stabilization at the start of the year, with positive net absorption of 0.2 million square feet. This is a modest but meaningful reversal after several years of losses, according to a JLL market Q1 report.
Gains were concentrated in LA North, South Bay and West LA, signaling more balanced leasing momentum across the region. Sublease availability continued to contract, falling by 500,000 square feet in Q1 and down 56% over six consecutive quarters, driven by expirations, new leases and some tenants re-occupying space.
While overall year-over-year rent growth was flat, the trophy segment outperformed, with average rents rising 12.9%, underscoring stronger demand for top-tier assets. Owner-user activity also persisted, highlighted by East West Bank's acquisition of Western Asset's Pasadena headquarters, positioning the bank for future expansion.
Leasing activity in Q1 was more geographically dispersed and driven by government and financial services tenants, rather than by the tech and entertainment tenants that historically anchored LA demand.
Major transactions included the North Los Angeles County Regional Center's 166,867-square-foot renewal in Chatsworth, one of the quarter's largest deals and the Federal Public Defenders' 74,056-square-foot lease at the former LA Times building in downtown LA. In the financial district, Bank of Hope signed a 50,000-square-foot lease and will relocate its headquarters from Mid-Wilshire.
Looking ahead, the aerospace and defense sector is emerging as a potential catalyst for demand. Companies such as Varda Space, Hermeus and Anduril expanded in the South Bay, clustering near specialized talent and other space-tech operators. Continued growth in AI-integrated hardware could further boost demand in innovation-oriented submarkets like El Segundo and Long Beach.
A notable Q1 2026 trend in the Los Angeles office market was the diversification of leasing demand, according to Henry Gjestrum, JLL research manager, who told GlobeSt.com that government and financial services now drive activity, rather than the traditional dominance of tech and entertainment users.
Overall, Q1 marked a tentative but notable shift toward stabilization, with improving absorption, tightening sublease supply and new sector drivers reshaping the demand landscape.
Source: GlobeSt/ALM