Downtown L.A. Office Vacancy Rises as Downsizing Continues

The overall vacancy rate in Downtown Los Angeles hit 32.8% at the end of the third quarter as major office tenants continued to downsize their office footprints.

The latest to make the adjustment is Wedbush Securities, a Los Angeles-based financial services firm that will be vacating the 100K SF headquarters that it has occupied for the past 24 years in the namesake Wedbush Center at 1000 Wilshire Boulevard.

Wedbush is relocating its HQ to a 20K SF space on Lake Avenue in Pasadena that will be designed to accommodate the company’s shift to a hybrid work schedule, the Los Angeles Times reported.

“It’s a big deal, a very big decision for the firm. The pandemic and COVID created a different kind of office for us,” Gary Wedbush, the firm’s president, told the newspaper.

“There are places like Pasadena that seem to have recovered more fully from the pandemic than Downtown Los Angeles has. That was a part of the decision-making,” he added.

With most of its employees required to be in the office only a third of the time, the company is creating an office-oriented toward shared workspaces that can be used as needed by various employees instead of assigned desks.

About 70% of the two floors Wedbush is leasing in Pasadena will be considered “hotel” space where employees can choose a workstation on days they are present, while the remaining 30% will be individual offices for financial advisors who need privacy to meet with clients, the company said. The top floor of the building on Lake Avenue has a rooftop deck that Wedbush plans to build out as an outdoor office space.

Wedbush expects to move into the new space in the first half of next year. The company’s lease at the Wilshire HQ expires in 2025.

The Greater Los Angeles (GLA) office market registered negative net absorption for the ninth consecutive quarter in Q3 2024 with more than 1.3M SF vacated during the third quarter.

Negative net absorption in the Downtown L.A. submarket totaled minus 489K SF, according to CBRE’s latest market report.

“The Greater Los Angeles office market continued its search for a bottom in Q3 2024, as both occupiers and landlords navigate the ongoing supply-demand imbalance exacerbated by the shift to hybrid and remote work models,” CBRE said.

“Many tenants continue to optimize their office space, leading to increased availability and a leasing market dominated by renewals,” the report said.

The overall vacancy rate in GLA was 24% in the third quarter, with the overall availability rate hitting 29.4%. Year-to-date net absorption stands at minus 4.4M SF in Greater Los Angeles.

A slight increase in the average direct asking rate was driven by a significant amount of new Class A vacant space added to the market during the quarter. Leasing activity in GLA totaled 2.6M SF, a decline of 20.6% from the previous quarter, and a 26.1% decrease in a year-over-year comparison.

The office development pipeline in Greater Los Angeles only delivered about 38K SF in the third quarter.