Los Angeles Commercial Real Estate Snapshot – Q1 2025
As we move through 2025, commercial real estate in Los Angeles is a mixed bag; some sectors are stabilizing, while others are still adjusting to post-pandemic realities. Here’s a breakdown of where each sector stands, based on the latest data from the National Association of REALTORS.
Los Angeles Office Market: Record Vacancy in Downtown, Modest Uptick in Leasing
. Downtown LA vacancy is now over 31%—one of the highest in the country.
Leasing activity reached 3.4 million sq. ft. in Q1 2025, slightly above the 5-year average.
Top-tier buildings in Century City are still attracting tenants at higher rents.
Most landlords are offering discounts and concessions to stay competitive.
The office market remains slow to recover.
The Los Angeles office market remains under serious pressure in 2025. Overall vacancy stands at 24.5%, up 150 basis points year-over-year, with Downtown LA surpassing 31% vacancy, the highest in the region.
Leasing activity is showing early signs of life: 3.4 million square feet were leased in Q1 2025, slightly higher than the same period last year and above the five-year quarterly average. However, demand is highly selective, with rent growth limited primarily to trophy buildings in submarkets like Century City.
Landlords are navigating this shift by offering steep concessions and rent discounts. The return-to-office push has slowed the pace of move-outs, but net absorption remains negative, and Class A buildings are disproportionately impacted.
Investor sentiment is cooling as office loan delinquency rates continue to rise nationwide. The market is in flux, and property owners in high-vacancy corridors, particularly Downtown, may need to reposition or repurpose to stay competitive.
Los Angeles Industrial Market: Cooling but Still Competitive in Q1 2025
. Vacancy Rate: 4.2% (9th straight quarterly increase)
Lease Rate: Projected to reach $1.40/sf in 2025 (up from $1.25 in 2022)
The Los Angeles industrial market is experiencing a slowdown after years of record-breaking growth. As of Q1 2025, vacancy rates have risen to 4.2%, marking the ninth straight quarter of increases driven by tenant move-outs and new construction that remains unleased.
For six consecutive quarters, net absorption has been negative, signaling a shift in momentum. Yet the fundamentals remain relatively strong: despite an 8.9 million square foot space loss, LA's industrial vacancy rate still sits at 6%, outperforming the national average of 7.0%.
Lease rates continue to climb, rising from $1.25/sf in 2022 to a projected $1.40/sf in 2025—an annual growth rate of 3.8%, underscoring ongoing demand for quality logistics and warehouse facilities.
In nearby Inland Empire, vacancy dropped to 7.4% thanks to strong net absorption, though sublease inventory remains high, creating added competition.
For owners of industrial property in Los Angeles, now is a pivotal time. Rising rents and strategic tenant demand offer opportunity—but only for those positioned correctly in today’s shifting market.
Los Angeles Retail Market: Stabilizing with High-Demand Niches
. Vacancy Rate: Projected 10.3%
. Lease Rate: Rising to $3.10/sf in 2025 (2.2% annual growth)
The Los Angeles retail market is adapting fast. While national rent growth has cooled, LA retail lease rates continue to rise—climbing from $2.90/sf in 2022 to a projected $3.10/sf in 2025, marking an average 2.2% annual increase.
Despite headwinds, including ongoing store closures and the impact of e-commerce, prime retail locations remain in high demand. The city did see the largest retail space loss nationally, with roughly 3.1 million square feet vacated, but the market is showing signs of stabilization.
Vacancy has leveled off at 10.3%, and grocery-anchored and luxury retail centers are outperforming, thanks to their consistent consumer draw and tenant stability.
Los Angeles retail is entering a new phase—leaner, more strategic, and increasingly focused on experience-driven and essential retail.
Los Angeles Multifamily Market: Stabilizing with Strong Rental Demand
. Net Absorption (National): +551,000 units (46% YoY increase)
. Trend in LA: Stabilizing
The Los Angeles multifamily market is showing renewed strength in 2025. While exact local absorption data wasn’t broken out, LA mirrors national trends of elevated net absorption (up 46%), slowing construction, and steady 8% vacancy rates.
Strong tenant demand is helping to stabilize rents after past oversupply and pricing pressures. Class B and C units are leading the recovery—especially in working-class neighborhoods and transit-accessible corridors—with faster lease-ups and stronger rent growth than Class A properties, which still face higher vacancy rates.
Construction has pulled back sharply, which is helping rebalance supply and demand. With fewer units entering the pipeline and leasing activity picking up, we’re seeing a more balanced, resilient rental market across Los Angeles.
Investment Trends
Sales volume in LA County is down 18.4% year-over-year, as investors reprice risk.
Cap rates are rising, reflecting caution in the market.
Industrial sales are picking up in Orange County, showing selective investor interest.
Outlook for 2025
The market appears to be stabilizing after a few tough years.
Vacancies may have peaked, and rents could be near bottom.
Industrial and logistics properties remain the strongest sector, thanks to e-commerce and port access.
Outlook is cautiously optimistic, with better activity expected if interest rates fall and the economy steadies.
Final Takeaway
Los Angeles commercial real estate in 2025 is in a transitional phase. The office market faces serious headwinds, but industrial, retail, and multifamily sectors show signs of bottoming out or even strengthening. Investors should watch closely—interest rate cuts and policy shifts later this year could reset the playing field.
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