The Los Angeles office market has had a bumpy start to its recovery. According to a new report from Avison Young, the office vacancy in L.A. has increased to 17.8% as rents tumble and concessions rise. The metrics show that tenants are exiting office space—not moving to new locations.

Work-from-home policies are the primary reason for the reduction in office usage, but it isn't the only reason. John Eichler, a principal at Avison Young, also says that business challenges and the co-working sector have both contributed to diminished demand. "A flight to quality among office users is a natural, cyclical trend and not unique to this post-COVID cycle," says Eichler. "Typically, the industry/user groups that have been most likely to take advantage of this discounted environment are those whose businesses have either thrived or held-up relatively well from both a revenue and employment standpoint. Timely examples of companies with revenues that have surged during the pandemic are of course tech and entertainment users as well as Am Law 100 firms and institutional finance companies."

It might be normal to see rising vacancy and lower rents following an economic dislocation, but landlords are also offering both monetary and term concessions. "As is typical when vacancies rise considerably, landlords increase monetary concessions including lower rental rates and increase free rent and TI allowances," says Eichler. "However, in this cycle, landlords are also offering significant term concessions in the form of both lease term reductions and through options for tenants to not only terminate their leases before the scheduled expirations, but also, in some cases, at low fee-penalties for doing so."