LOS ANGELES—A new market report from Savills Studley shows that the Los Angeles office market is still struggling. According to the report, leasing activity in Q1 2014 was down 16.4% from the previous quarter and 2.6% from Q1 2013. Savills Studley noted that poor job growth and the trend toward open-format and smaller office spaces is contributing to the decline.

The entertainment sector is leading the office market in terms of leasing activity. Lionsgate signed the largest lease in Q1 2014 for a 178,000-square-foot space in Santa Monica. The Oprah Winfrey Network, IMAX and Dreamworks also signed major leases during the quarter.

Creative office users are expanding outside of the typical Westside market due to limited availability. These companies are migrating further west, into the Playa Vista, San Pedro and El Segundo markets. IMAX, mentioned above, is part of the migration trend. Lincoln Property Co. recently broke ground on a 66,000-square-foot post-production and screening room in Playa Vista, scheduled to be complete in 2015, for the entertainment company.

Although demand for traditional office space remains restrained, supply is also dwindling in the top markets. The Westside market's class-A office space is down 1.8% over last year, giving landlords the opportunity to raise rents by 3.2% in Q1 2014. The downtown market, however, is gaining class-A office in a attempt to attract business to the revitalized area. In Q1 2014, the market's class-A office supply gained 1.4% of space.

On the bright side, while leasing activity has moderately declined in Q1, the report notes that investor activity has increased. These investors are especially interested in creative office spaces, which are now in demand from former traditional users as well as creative and entertainment companies. While this sector is thought to drive demand in the near future, the report expects the market to remain slow throughout the year.