The Greater Los Angeles office market saw a slight uptick in leasing activity in the first quarter of 2024, but the overall outlook remains bleak as availability reaches another record high and property values continue to plummet.

According to a report from Savills, LA recorded 3.2 million square feet of office leasing in Q1 2024, a 45% increase from the previous quarter and 13% higher than Q1 2023. However, much of this activity was driven by renewals from tech and media firms, as these companies rapidly reduce their office footprints nationwide.

The report noted that five of the top 10 leases signed in the quarter were renewals, while only two were for new locations. This includes a 247,768 square-foot renewal by William Morris Endeavor in Beverly Hills.

Despite the modest increase in leasing, the Greater LA availability rate reached a new high of 27.6% at the end of Q1, up 90 basis points from the previous quarter. This equates to over 60 million square feet of office space that is vacant, available for sublease, or soon to expire.

The report attributes this elevated availability to “hybrid workplace strategies” and negative office employment growth over the past year. In fact, major tech firms like Amazon are actively reducing their office footprints and ending leases early to cut costs.

While average asking rents ticked up slightly to $3.94 per square foot per month, Savills expects landlords to become more aggressive in dropping rents as they chase occupancy. At the same time, the firm warns that the “long-awaited reset in office building valuations” is only just beginning, as recent distressed sales have seen properties trade at steep discounts.

The report cites the $145 million sale of a Brookfield-run property in Downtown LA, which was about half the remaining debt on the asset. Another prominent tower in Brookfield’s troubled portfolio is now headed to foreclosure, underscoring the significant value declines impacting the LA office market.

Savills concludes that 2024 will be a year where more owners are forced to sell at a loss or consider converting or redeveloping their properties for non-office uses, as the fundamental challenges facing the sector show no signs of abating.