Los Angeles Commercial Market Update Q2 2025
Office: Vacancy rose to about 24% metro-wide, and leasing slowed as many companies downsized. Tenants that are moving prefer modern, well-located buildings in areas like West LA and Downtown, while older spaces sit empty. Landlords continue to offer concessions such as free rent and tenant improvement packages. Very little new office space is being built, which helps keep vacancy from climbing faster. Smaller owner-user buildings remain a bright spot.
Industrial: Vacancy moved into the upper 4% range, the highest in about a decade. More space is available, including subleases, as some tenants return square footage. Leasing is still happening but is more price-sensitive, with tenants negotiating harder on terms. Limited new supply is helping stabilize the market, though much of what’s being built is speculative and not pre-leased. Infill locations near ports remain in demand.
Retail: Availability is steady at around 6% metro-wide. Leasing slowed slightly from Q1, with most demand focused on neighborhood centers and busy corridors in higher-income areas. Restaurants and experiential tenants are filling some larger spaces. Rents remain stable, and very little new retail construction is underway, which helps balance supply.
Multifamily: Vacancy is in the low-to-mid 5% range. Rents are flat to slightly down compared to last year. A wave of new units has been delivered and is still being absorbed, which has slowed leasing compared to past years. Strong apartment demand continues to support nearby retail and smaller commercial uses such as medical and creative spaces.
Capital Markets: Property sales are slower as buyers and sellers struggle to agree on pricing. Higher interest rates make loans harder to secure, and lenders are requiring stronger income and better building condition. Well-located properties with reliable tenants are still attracting interest, but buyers are more selective and careful than in previous years.
Positioning Note
Showcase reliable income: highlight tenant strength, lease length, rent-to-sales performance (retail), and value versus replacement cost.
Los Angeles Commercial Market Early Q3 Signals to Watch
Leasing mix: New leases versus renewals will reveal if demand is starting to rebound, especially in West LA and creative submarkets.
Industrial absorption: How fast the 4–5 million sq. ft. pipeline and sublease space gets leased will set the tone for vacancy trends.
Retail activity: Food, beverage, and experiential tenants taking prime Westside and Beverly Hills space signal where retail momentum is strongest.
Adaptive reuse: Office-to-residential and mixed-use conversions, along with new city/state incentives, could reshape underperforming properties.
What This Means for Commercial Buyers And Sellers
Sellers (Office/Industrial): Set your price based on today’s market reality. Buyers are assuming longer vacancy times, the cost of fixing up space for new tenants (tenant improvements), and the broker fees required to lease the space (leasing commissions). They also look closely at the return they’ll get when they eventually sell (exit cap rate).
To make your property more attractive, give buyers confidence up front: share updated building reports, highlight recent energy or efficiency upgrades, and provide a clear plan for any major repairs or improvements.
Landlords: Be flexible and focus on tenant experience. Offer shorter initial leases with good options for renewal or growth. Provide targeted tenant improvements (TI — money landlords give to help tenants build out or customize their space), especially for medical or creative tenants who need special layouts.
Occupiers (Tenants): This is a “shop hard” market. Don’t just look at asking rent — compare the total cost of occupancy, including concessions like free rent and improvements. Ask for rights to test-fit the space and options to expand or shrink if your needs change.
Investors: Pay close attention to location, tenant mix, and buying below replacement cost. For older office properties, budget realistically for upgrades, possible conversions, or building smaller spec suites with modern finishes to attract tenants.
Conclusion
The Los Angeles commercial market is shifting, vacancy is creeping higher, tenants are more selective, and investors are demanding stronger fundamentals. But in every sector, well-located, high-quality properties still perform. Whether you’re a seller looking to position your asset competitively, a landlord navigating tougher leasing conditions, an occupier seeking value, or an investor searching for below-replacement-cost opportunities, the right strategy matters now more than ever.
If you’re considering selling, buying, or repositioning a commercial property in Los Angeles, contact me for a complimentary consultation.