Los Angeles Office Market Report: Q1 2026

Denise Kozlowski • Research • May 05, 2026 • Time reading: 6 min
Los Angeles Map

The Los Angeles office market showed meaningful signs of stabilization in Q1 2026 — though conditions remain uneven and the recovery is far from linear. Leasing activity hit its highest single-quarter total since before the pandemic, the construction pipeline is contracting, and the pace of occupancy loss slowed considerably from late 2024 and early 2025. At the same time, vacancy continued to climb, net absorption remained negative for a sixteenth consecutive quarter, and several key submarkets are still absorbing significant excess supply.

For tenants, the market continues to offer genuine leverage. For landlords and investors, the picture is more nuanced — pockets of real demand are emerging, but they’re concentrated in specific submarkets and property types.

Key Q1 2026 Metrics at a Glance

Note: Metric variations between sources reflect differences in survey methodology, submarket boundaries, and building inventory tracked. Both data sets are from Q1 2026.

Market Overview: Stabilizing, But Not Yet Recovered

The most significant headline from Q1 2026 is what didn’t happen: the steep occupancy freefall of 2023 and early 2024 did not repeat. 

Net absorption improved dramatically from the negative 1.2 million square feet recorded in Q4 2025, moderating to approximately negative 404,000 square feet — still negative, but the smallest quarterly loss in several quarters.

Overall vacancy rose 20 basis points quarter-over-quarter to 25.5%, and is up 120 basis points year-over-year. Availability — which captures space being marketed but not yet vacant — reached 30.5%, up 40 basis points from Q4 2025.

The sublease picture offered a brighter signal. Vacant sublease inventory declined 10.3% quarter-over-quarter and 22% year-over-year to approximately 6.7 million square feet — a meaningful reduction in the shadow supply that had been competing aggressively with direct listings for much of the past two years. That trend, if sustained, removes a significant source of downward pressure on effective rents.

On the economic side, Los Angeles County employment grew by 34,200 nonfarm jobs year-over-year — a modest 0.8% gain that continues to trail historical trends. Job growth has been concentrated in healthcare and education, sectors that generate limited traditional office demand. Professional and business services — the sector most directly tied to office leasing — added just 5,000 jobs, or 0.8% year-over-year. Government, financial activities, and construction all contracted. Unemployment improved modestly to 5.5%, down from 5.8% a year earlier, but the overall employment backdrop remains a headwind for office demand.

Leasing Activity: A Post-Pandemic Record

Despite challenged fundamentals, total leasing volume reached 4.8 million square feet in Q1 2026 — up 3.7% from Q4 2025 and up 27.7% year-over-year. That makes it the highest single-quarter leasing total recorded in the Los Angeles market since before the pandemic.

Direct leasing drove the bulk of activity, comprising 90.3% of quarterly volume at 4.3 million square feet. Sublease activity also expanded — surging 62.4% year-over-year to 464,000 square feet, pushing the sublease share of total activity from 7.6% a year ago to 9.7%.

West Los Angeles led all submarkets with 1.4 million square feet of leasing activity, followed by South Bay at 799,300 square feet, Tri-Cities at 753,400 square feet, San Fernando Valley at 634,200 square feet, and Downtown LA contributing 487,000 square feet.

By industry, the financial sector was the most active occupier in Q1, accounting for approximately 253,000 square feet across direct deals and renewals. Government followed at 232,000 square feet, with professional services and legal contributing 221,000 square feet and 195,000 square feet respectively.

Notable Q1 2026 Lease Transactions

Vacancy by Submarket: Wide Divergence

Conditions across LA’s submarkets remain sharply divergent — which matters significantly for tenants and investors evaluating specific locations.

Highest vacancy submarkets:

Tightest submarkets:

The contrast is stark. East Downtown’s 58.4% vacancy rate reflects years of occupancy loss and conversion activity, while Mid-Counties and San Gabriel Valley — more affordable, suburban-oriented markets — have maintained healthy demand.

A notable trend within Downtown LA: tenants are staying in the CBD but gravitating toward the Bunker Hill submarket, often using the move to reduce their overall footprint. Law firms have been particularly active in this pattern. Public safety concerns, evolving workplace standards, and a limited supply of highly functional buildings in Bunker Hill are all driving this intra-downtown rotation.

Asking Rents: Holding at the Top, Softening Below

The overall average direct asking rate was $4.13 per square foot per month (FSG) — essentially flat quarter-over-quarter (down $0.01 from Q4 2025) but $0.04 above Q1 2025.

The market’s pricing range is wide and tells an important story about where demand is concentrated:

That more than two-to-one pricing differential between West LA and the San Fernando Valley continues to drive tenants toward suburban alternatives where budget is a primary constraint.

Headline asking rents tell only part of the story. Elevated vacancy and sustained negative absorption are forcing landlords to compete on effective economics — free rent periods, generous TI packages, and plug-and-play space are all being deployed more aggressively than asking rents alone suggest.

What to Watch in Q2 2026 and Beyond

A few dynamics worth tracking as the year progresses:

The Los Angeles office market is moving — but not uniformly. If you’re evaluating space in LA, repositioning an asset, or tracking submarket conditions for an upcoming decision, we’re tracking these trends closely and happy to discuss what the data means for your specific situation.

Explore More Insights