LOS ANGELES -- Office leasing in Los Angeles County fell to its lowest point since the Great Recession in the second quarter as many businesses reeling from coronavirus restrictions and economic uncertainty halted their searches for new space.
Leasing transactions were about 60% to 70% below normal for that time of year, according to real estate brokerage CBRE. Deals were put on hold or canceled in some cases because even walking into an office building seemed risky as the novel coronavirus spread and Gov. Gavin Newsom issued a statewide "stay at home" order in mid-March.
Future demand for office space grew uncertain as companies sent employees home to work remotely for the unknown duration of the COVID-19 pandemic.
"The combination of market uncertainty and the fact that it was difficult to tour space meant that transactions dropped dramatically," said Eric Willett, director of research in the Southwest for CBRE.
Yet, the office market remained in decent shape from a landlord's perspective with the overall vacancy rate of 12.8% -- still lower than it was a year earlier -- and monthly asking rental rates holding steady at about $3.87 per square foot for Class A space.
"It's not the worst-case scenario some were imagining," Willett said.
The commercial rental market has stabilized enough lately that many large and small tenants feel comfortable to move forward with lease negotiations, but they are more interested in leases that last a year to 18 months as opposed to terms of five or 10 years that were common in the past.
"We're still in a period of intense economic and medical uncertainty," he said.
The jury is also out on how much office space per employee companies will want after the pandemic has been tamed.
Will some businesses shrink their rented office footprint by having most of their workers continue to do their jobs remotely? Might other employers bring their workers back into the office but give them significantly more personal space to prevent the spread of viruses? That would require renting bigger offices than they have now.