Despite the poor performance in the first quarter, Ressler isn't concerned about the health of the L.A. office market. It is still one of the top performing office markets in California. “We see the Los Angeles area to be one of the prime markets for robust employment growth,” he says. “We are projecting a minimum yearly growth of 1.3% and 10-year cumulative growth of +6%.”

Looking ahead, Ressler says that the commercial real estate market in Los Angeles has a “positive outlook.” The biggest hurdles for growth in the market are transportation and innovation from governance. “Los Angeles continues to receive large amounts of private capital and was ranked in the top tier in 2016,” he explains. “Business has continuously promoted the necessity of growth with the changing 21st century demographics of L.A.”

LOS ANGELES—Los Angeles offices sales volume plummeted in the 1Q17. Sales activity fell 36% year-over-year and pricing for office properties fell 46% per square foot year-over-year, according to a new report from Commercial Café. The decline in activity was surprising, considering that Los Angeles had its strongest office performance in a decade in 2016, and 4Q16 was the best quarter in four years.

“A total of 22 office deals closed in the first three months of 2017, encompassing 5 million square feet of space and totaling $1.5 billion in dollar volume; however, we believe that as the year progresses a more robust annualized number will show a more favorable increase,” Doug Ressler, senior research officer at Yardi Matrix, tells GlobeSt.com. “From a comparison Q4 for 2016 when compared to the previous 3 quarters for 2016 and was comprised of high dollar volumes located in West LA area.”

In addition to a slow down in sales activity, leasing activity also slowed down in the quarter, with an uptick in vacancy rate and negative absorption. Next quarter, the office market is poised to get even more office supply, with deliveries totaling 2.8 million square feet of new offices, and 1.3 million square feet from Hanjin Group's 900 Wilshire Blvd alone. “Construction activity is topping out due to costs and availability of skilled labor,” adds Ressler. “This is leading to the upgrades of existing buildings, which are driving rents higher, especially when it is combined with Average Cap Rate of 6.2%.”

Despite the poor performance in the first quarter, Ressler isn't concerned about the health of the L.A. office market. It is still one of the top performing office markets in California. “We see the Los Angeles area to be one of the prime markets for robust employment growth,” he says. “We are projecting a minimum yearly growth of 1.3% and 10-year cumulative growth of +6%.”

Looking ahead, Ressler says that the commercial real estate market in Los Angeles has a “positive outlook.” The biggest hurdles for growth in the market are transportation and innovation from governance. “Los Angeles continues to receive large amounts of private capital and was ranked in the top tier in 2016,” he explains. “Business has continuously promoted the necessity of growth with the changing 21st century demographics of L.A.”