Limited supply issues have struck the industrial and multifamily markets—causing what some investors are calling an affordability crisis—and the West L.A. office market could be next. The current development pipeline has less than 4 million square feet currently under construction in West L.A., and in a market with approximately 50 million square feet of office space and a 12% vacancy, that number is alarming. Office rents in the area have already surpassed prior peaks levels, and with little development on the horizon, they are poised to continue to rise through 2021, according to research by Rick Buckley and Owen Fileti of L.A. Realty Partners.

“It is shocking how little is in the pipeline to be delivered,” Buckley, a principal at L.A. Realty Partners, tells GlobeSt.com. “The rents have surpassed where we were at the last peak, so it does make sense for developers to develop. The challenge that developers are having is two fold. One: There is a lack of developable sites in the size and scale that it requires. It is hard to get scale in West L.A. And two: anti-developer sentiment in certain areas.”

Typically, when vacancy rates drop below 10%, landlords raise rents. While vacancy rates in the market are at 12%, the limited development pipeline could eat up that cushion soon. “Landlords start to increase rents when vacancy rates dip into the single digits,” explains Buckley. “We aren't there yet, but we are already at post-peak rents. The market has never seen the rents that we have seen today, and we are also postured for additional rent growth if we dip below 10% vacancy, which we are not far from now.”