LOS ANGELES—A new skyline office real estate report from JLL shows that Downtown Los Angeles' skyscrapers have the seventh lowest vacancy rate in the US, at 81.1%. Likewise, the submarket has the third highest vacancy of trophy skyline properties in the US, at 17.1%, with large blocks of vacant space.

“The vacancy is primarily a function of the historical tenant base of the Downtown Los Angeles marketplace, of which nearly two-thirds rests in traditional industries, like legal, finance, accounting and insurance,” Josh Wrobel, managing director at JLL, tells GlobeSt.com. “The traditional industries have, through a variety of factors, including downsizing and rightsizing via headcount and/or efficiency, mergers and acquisitions and recession layoffs, reduced their overall footprint in downtown dramatically. For example, the big 4 accounting firms' footprint in downtown reduced from approximately 1 million square feet to approximately 500,000 square feet in a two-to-three year window.”

Despite the high vacancies, the downtown submarket still boasts some of the highest rental rate averages in the country, at about $39.30 per square foot, and the seventh highest investment sales volume for the past five quarters, at $1.07 billion. However, that may make sense considering the influx of creative tenants that have recently plated roots in Downtown Los Angeles, including Gensler, NastyGal, HauteLook, WeWork, Uber Office and Cross Campus. “In order to truly fuel this change, downtown could use a few, large trailblazing tenants to highlight the market's impressive live/work/play environment to the workforce,” says Wrobel. “Historically, the large technology tenants would not have looked at the market as a viable option, but their recent investigations signal the pending wave of tenants that will ultimately see the value of downtown's infrastructure as the area continues to grow.”

As far as skyscrapers go, the downtown market's biggest competition is Century City, which has long been a haven for high-end, large footprint corporate users, and that continues to be the case. Century City has an ever-decreasing vacancy rate and a limited supply of large blocks of space. The JLL report also shows that the submarket has an investment sales volume that ranks in the top five nationally, at $1.64 billion. Plus, the market benefits from rising rental rates that are not only concentrated in the skyline buildings, but across the highly sought-after Westside market.

“Century City benefits from close proximity to a variety of submarkets that are not only white-hot due to their limited vacancy, thus, pushing rates and expanding tenants out of their markets, but also due the slightly higher occupancy from the creative, technology, media and entertainment industries,” says Wrobel. “Media and entertainment tenants such as ICM and Fox have been a part of the Century City fabric and they have acted as a beacon to the industries that are experiencing growth, which allows Century City to help fight against the similar downsizing/right-sizing trends from the traditional industries that have hit both downtown and Century City. Media, entertainment and advertising tenants such as Endemol/Shine, IPG and others give a market like Century City an opportunity to be their future office location whereas these types of tenants have not made significant inroads in downtown.”