The Los Angeles office market witnessed a steady rise in available sublease space. As of the end of 1Q 2018, over 5.1 million SF of office space is available for sublease, which is a 4.3% increase over the quarter. This upsurge has coincided with an increased supply of office space from new construction, which totaled 615,850 SF this quarter.
This increase in available office space has placed pressure on sublessors looking to sublease their excess office space. While sublease asking rents increased on average over the quarter, the hike is the result of the addition of high priced office space in West LA and Downtown being placed on the market by sublessors looking to recoup the cost of their excess space.
For example, 5,723 SF of office space was placed on the market for sublease at 100 Wilshire Blvd in Santa Monica for $8.00/SF FSG. Additionally, a 12,429 SF block of office space was also placed on the market at the Oppenheimer Tower in Santa Monica, with an asking rent of $4.50/SF. Sublessors with space on the market have begun lowering asking rents. For example, Maple Plaza in Beverly Hills dropped the asking rent to $4.25/SF from $4.90/SF on 15,426 SF of sublease space.
What’s more, some tenants placing space on the market for sublease have vacated the space altogether. In 1Q 2018, vacant sublease space increased to more than 2.4 million square feet. Nearly half of all sublease space is vacant, placing additional pressure on direct rents, which were flat over the quarter.