LA County sees office vacancy spike while logistics activity surges

Los Angeles County businesses have reduced their office footprint as more people work remotely or with hybrid schedules during the pandemic, but warehouse/distribution operations continue to surge amid a rise in online shopping, a new report reveals.

Beacon Economics’ latest regional outlook shows the county’s office vacancy rate rose to 16.5% in the third quarter of 2022. That was a 2.3 percentage point increase from the first quarter of 2020 and the highest level in more than 20 years. Estimates from the U.S. Census Bureau’s most recent American Community Survey show nearly 21% of LA County’s residents work from home — nearly four times the pre-pandemic average. 

Use of available office space in the county has fallen by 1.8 million square feet, despite a 1.8% office employment uptick since February 2020, the Beacon report said.

The numbers show employers are downsizing their office operations and offering more accommodations for hybrid work schedules.

L.A. County’s warehouse/distribution vacancy rate for the third quarter of 2022 was 0.9%, a 4.8 percentage point decrease from the first quarter of 2020. The decline occurred despite 8.4 million square feet of new space coming online. (File photo by Watchara Phomicinda, The Press-Enterprise/SCNG)

Conversely, the county’s warehouse/distribution vacancy rate was 0.9% for the third quarter of 2022, a 4.8 percentage point decrease from the first quarter of 2020. That decline occurred despite 8.4 million square feet of new space coming online.

“The rapid growth in warehouse and distribution activity will begin to cool off and settle,” the report said. “However, the outlook for office is mixed.”

Established and emerging technology hubs in such areas as West Los Angeles and Culver City are bouncing back, the study said, but more traditional business districts with high-rise cubicles are struggling.

“As returning employees work fewer days in the office and remote/hybrid work becomes increasingly utilized, the demand for floor space has declined across Los Angeles,” Beacon said. “This trend is expected to continue.”

Scores of businesses have expanded their hybrid and work-from-home options, including several major companies.

In late 2021, 3M announced a new “Work Your Way” option that lets employees create a schedule that helps them work when and where they can most effectively.

The company operates a manufacturing facility in Northridge and has numerous offices throughout Southern California, including locations in L.A., Ontario, Monrovia, Pasadena, Canoga Park and Irvine, among others. 

“It is about getting your work done and delivering results,” said Aman Gupta, 3M’s vice president of enterprise workplace strategy. “Not about where you sit and what time you logged on.”

Airbnb announced a similar plan in April 2022 that allows employees “to work anywhere permanently,” in a bid to improve the company’s workplace flexibility.

In an email sent to staff, Airbnb CEO Brian Chesky noted that the workplace dynamic has changed.

“Today’s startups have embraced remote work and flexibility, and I think this will become the predominant way that we all work 10 years from now,” Chesky wrote. “This is where the world is going.”

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