Los Angeles Commercial Real Estate Market Q3 2025
Commercial real estate activity across Los Angeles–Long Beach–Anaheim continues to normalize in Q3 2025, but not evenly. Office, multifamily, retail, and industrial are all moving at different speeds, and migration, employment trends, and pricing pressure are reshaping investment decisions.
Below is a breakdown of what’s really happening, and why it matters if you own, invest, or are considering selling commercial property in Los Angeles.
Is the Los Angeles Commercial Real Estate Market Weak in 2025?
Yes, demand across all major commercial sectors is weaker than the national average, but that does not mean the market is collapsing.
What we’re seeing instead:
Slower absorption
Rent growth flattening
Higher selectivity from buyers
Capital becoming disciplined, not absent
This is a price discovery market, not a distressed one.
Why Is Commercial Real Estate Demand Slower in Los Angeles?
Several structural factors are driving the slowdown:
Net Migration Loss
Los Angeles recorded net domestic out-migration of over 100,000 residents in 2023, continuing a multi-year trend. While international migration partially offsets this, population churn directly impacts office, retail, and housing demand.
Employment Growth Below National Average
12-month job creation: 12,500
1-year job growth: 0.3% (vs. 0.6% nationally)
Slower job growth means less space absorption, especially in office and industrial.
Higher Unemployment
Los Angeles unemployment: 6.3%
U.S. average: 4.3%
This gap matters for leasing velocity and rent pressure.
What Is Happening With Office Real Estate in Los Angeles?
Is Office Space Still a Bad Investment in LA?
Office remains the weakest sector, and this is reflected clearly in the data.
Key Q3 2025 metrics:
Vacancy rate: 15.9%
Rent growth (12 months): -0.3%
Net absorption (12 months): -2.05M SF
Market cap rates: ~7.5%
Office tenants are consolidating, downsizing, or renegotiating—not expanding.
That said, well-located, creative, or owner-user-friendly buildings continue to transact, especially when priced realistically.
Is Multifamily Still Strong in Los Angeles?
Are Apartments a Safe Investment in 2025?
Multifamily remains the most resilient asset class, but momentum has slowed.
Q3 2025 highlights:
Vacancy rate: 5.4%
Average asking rent: $2,334/unit
Effective rent: $2,316/unit
Cap rates: ~5.0%
Rent growth: 0.5% (flattening)
Important insight: Vacancy remains lower than national averages, which is critical. However, absorption is slowing due to affordability constraints and new deliveries.
This is a cash-flow and operations market, not a rent-growth market.
Are Rents Going Down in Los Angeles Apartments?
Short answer: Rents are not collapsing, but they are no longer accelerating.
Expect:
Flat to modest rent growth
Increased concessions in select submarkets
Greater focus on unit quality, amenities, and management efficiency
What’s Happening With Retail Real Estate in Los Angeles?
Is Retail Making a Comeback or Still Risky?
Retail is stable but uneven.
Q3 2025 data:
Vacancy rate: 5.9%
Rent growth: -1.1%
Net absorption (12 months): -1.79M SF
Market cap rates: ~5.8%
Neighborhood retail, grocery-anchored centers, and service-based tenants continue to perform. Big-box and discretionary retail remain under pressure.
Transaction pricing shows buyers are demanding stronger yields and tenant credit.
Is Industrial Real Estate Slowing Down in Southern California?
Is the Industrial Boom Over?
Industrial has shifted from boom to normalization.
Key figures:
Vacancy rate: 6.4%
Rent growth (12 months): -4.3%
Net absorption (12 months): -4.3M SF
Cap rates: ~5.1%
While fundamentals remain stronger than office or retail, rent compression and supply delivery have cooled the sector significantly.
What Does This Mean for Commercial Property Owners?
This is the question owners should be asking:
Should I Sell My Commercial Property in 2025 in Los Angeles?
For many owners, yes, before further softening.
Reasons:
Cap rates have already adjusted
Buyers are active but disciplined
Well-priced assets still trade
Waiting may mean competing with more inventory
Owners holding underperforming assets or facing refinancing pressure should be especially proactive.
What Are Investors Looking for in Los Angeles Right Now?
Search trends show buyers are focused on:
Cash flow over appreciation
Realistic pricing
Operational upside
Lower vacancy risk
Strong submarket fundamentals
This favors experienced operators and sellers who understand positioning and timing.
Final Take: Los Angeles Commercial Real Estate Is Resetting, Not Failing
Q3 2025 confirms a clear shift:
Slower demand
More selective capital
Increased pricing discipline
Strong differentiation between asset quality
For investors, this is a market of strategy and patience.
For owners, this is a market of timing and positioning.
The winners are not guessing—they are acting on data.
Santa Monica, Brentwood & Westwood Commercial Real Estate Market Q&A (2025)
What is the Santa Monica commercial real estate market like right now?
Santa Monica’s commercial market in 2025 reflects a recalibration rather than a collapse. Office and retail demand have softened as work patterns and consumer behavior evolve, while multifamily continues to benefit from long-term housing constraints and coastal desirability. Investors remain active, but pricing, tenant quality, and asset positioning matter more than they did during the previous cycle.
Is office space struggling in Santa Monica?
Office space in Santa Monica is experiencing elevated vacancy compared to pre-2020 levels. Tenants are leasing more selectively, favoring well-located, efficient, and high-quality buildings. Older or less flexible office assets face longer lease-up periods, while creative and boutique spaces continue to attract interest when priced realistically.
Are office rents in Santa Monica going down?
Asking rents have stabilized rather than collapsed. While landlords are more flexible with concessions and lease terms, premium buildings in walkable locations continue to command strong pricing. The gap between top-tier and secondary office space has widened, making building quality a defining factor.
How is Santa Monica retail performing?
Retail performance in Santa Monica varies by corridor. High-visibility streets and neighborhood-serving retail continue to draw tenants, while weaker locations experience slower leasing. Tourism supports seasonal demand, but long-term success depends on experiential, service-oriented, and food-driven retail rather than traditional big-box formats.
Is multifamily still a strong investment in Santa Monica?
Multifamily remains one of the most stable commercial asset classes in Santa Monica. Vacancy levels remain relatively low due to limited housing supply and persistent renter demand. Rent growth has moderated, shifting investor focus toward operational efficiency, long-term cash flow, and regulatory awareness rather than aggressive upside assumptions.
What makes Brentwood’s commercial real estate market different?
Brentwood’s commercial market is smaller, more controlled, and neighborhood-oriented. Demand is driven by professional services, medical offices, boutique retail, and high-income residents. Limited inventory and zoning constraints contribute to long-term stability, making Brentwood attractive to investors seeking predictable occupancy rather than high turnover.
Is retail in Brentwood more resilient than Santa Monica?
Retail in Brentwood tends to be more insulated from volatility due to its reliance on local spending rather than tourism. Well-located retail near residential density and established shopping hubs benefits from consistent foot traffic and longer tenant retention, particularly in food, wellness, and specialty services.
What defines the Westwood commercial real estate market?
Westwood’s commercial landscape is shaped by institutional presence, dense housing, and steady daytime population. Office demand is anchored by education, healthcare, and professional users, while retail benefits from student and resident activity. Mixed-use properties perform well due to diversified income streams.
How does Westwood compare to Santa Monica and Brentwood for investors?
Santa Monica offers scale, visibility, and a strong lifestyle brand but requires careful asset selection. Brentwood offers stability, limited supply, and affluent demographics. Westwood provides institutional demand, consistent foot traffic, and mixed-use potential. Each market rewards a different investment strategy rather than a one-size-fits-all approach.
Is now a good time to buy or sell commercial property in these areas?
This market favors informed decision-making. Buyers benefit from increased negotiation leverage and clearer pricing signals, while sellers with well-positioned assets can still achieve strong outcomes. Timing, pricing, and presentation are critical, particularly for office and retail properties.
What should commercial property owners be thinking about in 2025?
Owners should focus on asset relevance, tenant demand, and long-term positioning. Properties that align with how people live, work, and spend today will outperform those that rely on outdated assumptions. Strategic upgrades, flexible leasing strategies, and realistic pricing are key to maintaining value.
Looking at selling, repositioning, or acquiring commercial property on the Westside? Request a market-specific valuation or investment discussion.
Market Data & Advisory Disclaimer
The market information and commentary provided herein are based on a synthesis of publicly available and proprietary industry sources, including national and regional commercial real estate research providers, brokerage market reports, and listing platforms. Sources may include, but are not limited to, National Association of Realtors® (NAR) commercial market data, CoStar Group, LoopNet, and other third-party research publications. While the information is believed to be reliable, it is not guaranteed and is subject to change. This material is provided for informational purposes only and does not constitute financial, legal, or investment advice.