Leasing commercial space in Los Angeles.

Most tenants negotiate the wrong number. They push the landlord from $3.60 to $3.45 on base rent, feel like they won, and sign a lease that quietly costs them more than the building across the street that quoted $3.75. The rate is visible, so it gets negotiated. Free rent, tenant improvement dollars, escalation structure, operating-expense exclusions, and the load factor applied to your square footage are less visible, and they move the total more.

This guide walks the whole process: how the three lease structures actually differ, how to convert any proposal into a single comparable number, what the LA market is genuinely giving up in concessions right now, how long the deal takes from first tour to move-in, and the specific clauses and local requirements that turn a good deal into an expensive one after signing.

Your leverage right now

Q2 2026 · by product type

Leverage is not evenly distributed across Los Angeles, and it is not evenly distributed within a single product type. Office tenants have more room than they have had in fifteen years. Industrial tenants have real room that is closing. Retail tenants have almost none in the best corridors and a fair amount everywhere else.

Office: the most tenant-favorable market in fifteen years

Direct office vacancy is 16.4% and total vacancy including sublease is 17.8%. Average asking rent has been flat at $3.50 PSF/month full-service for a full year. That flatness is the tell. Landlords are not cutting face rate, because face rate is what their lender and their appraiser see. They are paying tenants in concessions instead, which do not show up on a rent roll the same way.

This is why the headline rate has become nearly meaningless in LA office. Two buildings quoting $3.50 can be twenty percent apart on effective cost once you account for free rent, TI, and escalation structure.

Industrial: real leverage, closing fast

Vacancy at 6.0% is nearly double the long-run average of 3.2%, and rents have corrected roughly 32% from their Q2 2023 peak. But Q2 2026 posted 4.0M SF of positive net absorption against just 184,000 SF of new deliveries, and leasing volume hit 11.2M SF — the strongest quarter since 2021.

Nationally, industrial free rent as a share of lease term reached a cycle high in Q1 2026 at roughly 4.5% for non-bulk and 4.8% for bulk, against a pre-pandemic norm near 2.2%. Bulk ticked down for the first time in eleven quarters. That is what the top of a concession cycle looks like.

Retail: leverage depends entirely on the corridor

Retail vacancy is 5.7%, up only 20 basis points year over year, and under-construction space fell 23% to about 643,000 SF. Los Angeles has added roughly 180,000 SF of retail annually over the past decade, with demolitions nearly offsetting deliveries. There is no supply wave coming.

Practically: in a prime Westside corridor with quality inline space renting at $6.50–$9.00 PSF/month NNN, you have very little leverage and should expect to compete. In the San Fernando Valley and eastern submarkets at $3.00–$5.50 PSF/month NNN, landlords are considerably more flexible, particularly single-asset owners of older inventory.

Lease structures: FSG, NNN, and modified gross

What the quoted number actually includes

A $3.50 full-service rent and a $2.65 triple-net rent are frequently the same deal. Comparing headline rates across structures is the single most common and most expensive error tenants make in this market, and it happens on nearly every search that includes more than one building type.

The base year is where full-service leases get expensive

In a full-service lease you pay one number, and the landlord absorbs operating expenses up to a stated base year — typically the calendar year the lease commences. From year two onward you pay your proportionate share of every dollar of operating expense above that baseline.

Three things to check before you accept a base year:

Is it the right year? A lease commencing in October 2026 with a 2026 base year gives you a baseline set by a partial year of stabilized expenses. If the building was under-occupied that year, the base is artificially low and your escalations start immediately. Push for the first full calendar year of the term.

Is it grossed up? A gross-up provision adjusts variable expenses as if the building were 95–100% occupied. Without one, a landlord who leases up the building after your base year passes the entire increase in variable costs through to you — costs that rose because they filled the building, not because anything got more expensive. Always ask for a gross-up at 95% or higher.

What is excluded? The list of exclusions matters more than the base year itself. See the negotiation section below.

Rentable vs usable: the load factor

You are paying for space you cannot occupy

In a multi-tenant office building you lease rentable square feet, not usable square feet. The difference is your share of lobbies, corridors, elevator lobbies, restrooms and mechanical rooms — the load factor, sometimes called the core factor or add-on factor.

Typical LA office load factors run 12–20%. Single-tenant floors sit at the low end. High-rise buildings with large cores, multiple elevator banks and full-floor common corridors sit at the high end, and older Downtown towers can exceed 20%.

This matters because two proposals quoting the same rate on the same usable footprint are not the same deal. A 20% load factor against a 12% load factor is roughly a 7% difference in annual rent for identical working space.

True occupancy cost

Converting any proposal to one comparable number

Every proposal you receive will be structured to look good. The only way to compare them is to reduce each to a single effective rate: total net cost over the term, divided by square feet, divided by months.

What the quoted rate never includes

Parking. In LA this is the largest hidden line item and it is almost never bundled. Downtown and Century City reserved stalls run into the hundreds of dollars per stall per month; suburban surface parking may be free. For a staff-dense office use, parking can add ten percent or more to occupancy cost. Get the stall count, the rate, the reserved-versus-unreserved split, and whether the rate is fixed or floats with market.

After-hours HVAC. Full-service leases specify building hours — commonly 8am–6pm weekdays and a half day Saturday. Anything outside that is billed hourly, often $75–$150 per hour per zone. If your business runs evenings or weekends, this is a real number and it is negotiable.

Cabling and IT. Rarely covered by a TI allowance. Budget separately.

Furniture, signage, and equipment. TI allowances cover improvements that become part of the building. Anything you would take with you when you leave is on you.

The security deposit and any letter of credit. Not a cost exactly, but it is capital you cannot deploy, and an LC carries a bank fee. Negotiate a burn-down schedule that reduces the deposit as you demonstrate payment history.

Moving and downtime. Dual rent during overlap, plus the operational cost of the move itself.

The concession package

What LA landlords are actually giving up

Concessions are where the deal is made in 2026. The table below is a directional benchmark for what creditworthy tenants are securing on standard terms. It is a starting point for calibrating an ask, not a quote — every building has its own cost basis, lender constraints and vacancy exposure.

Free rent

The most liquid concession and usually the first one a landlord will move on, because it costs them cash flow in a single period rather than permanently repricing the asset. A useful rule of thumb in LA office right now is roughly one month abated per year of term, with more available on longer commitments and in high-vacancy submarkets. Nationally, ten-year Class A gateway deals have been seeing eight to twelve months.

Two details that materially change the value:

Does abatement cover operating expenses, or base rent only? In NNN deals free rent almost always applies to base rent only — you still pay pass-throughs during the abatement. Ask for gross abatement.

Is it front-loaded or spread? Front-loaded abatement during your build-out period is worth far more than months scattered across the term, because it overlaps with the period you are paying rent somewhere else.

Tenant improvement allowance

Current LA ranges by class, for office on a five-to-seven year term:

Term length is the biggest lever. Moving from a three-year to a seven-year term commonly unlocks fifty to a hundred percent more allowance, because the landlord amortizes the investment across a longer revenue base. Credit is the second lever — multiple years of clean financials, or a personal guaranty from a young company, both move the number.

Also confirm, in writing: whether architectural and engineering fees are covered (frequently not), whether LADBS permit and plan-check fees are covered (frequently not), whether unused allowance converts to free rent (usually not unless negotiated), and whether there is a use-it-or-lose-it deadline (there usually is).

Escalations

Fixed annual increases of 3% are the LA convention. In a tenant’s market 2.5% is achievable, and over a ten-year term that half point compounds into real money — roughly 2.7% of total rent.

Push hard for fixed escalations over CPI-indexed ones. Uncapped CPI clauses look reasonable in a low-inflation period and become the single largest risk exposure in a lease when inflation runs. If a landlord insists on CPI, negotiate a cap; 4% annual maximum is a reasonable ask, and a floor of 0% is a fair trade.

Operating expense caps and exclusions

Less glamorous than free rent, frequently worth more over a long term. Negotiate a cap on controllable operating expenses — typically 3–5% annually, cumulative — while leaving taxes, insurance and utilities uncapped, since a landlord genuinely cannot control those.

Then negotiate the exclusion list. At minimum, operating expenses should exclude: capital improvements (except those that reduce operating costs, amortized over useful life), leasing commissions and marketing, tenant improvement work for other tenants, the landlord’s financing costs, ground rent, costs reimbursed by insurance or warranty, expenses arising from the landlord’s negligence, and executive salaries above building-level management.

Add an audit right: the ability to inspect the landlord’s books on reasonable notice, with the landlord paying audit costs if the reconciliation is off by more than 3–5%.

How long the deal actually takes

The critical path, start to occupancy

The most expensive mistake in commercial leasing is starting late. A tenant with ninety days left on their lease has exactly one option: renew on the landlord’s terms. A tenant with nine months has competing proposals, and competing proposals are the only real source of leverage in a negotiation.

The permitting phase, specifically

Most commercial tenant improvements in the City of Los Angeles go through LADBS. Simple scopes can be issued over the counter same-day. Anything touching structure, MEP distribution, occupancy classification, accessibility, or fire and life safety enters plan check.

Published plan check runs 4–12 weeks. But most commercial projects go through one to three correction cycles, and each round adds 2–6 weeks. Total time from application to permit issuance for a typical commercial project is commonly 3–6 months once corrections, zoning review and interdepartmental clearances are factored in.

Restaurants, medical offices, assembly uses and older buildings run past that consistently, because of additional review around health, fire, ADA and existing conditions. A change of occupancy classification triggers a separate certificate of occupancy inspection.

Two things that genuinely save time: LADBS offers pre-submittal consultations where a plan checker reviews the project concept before formal submission, and using a contractor and architect who work in LADBS regularly. One avoided correction cycle is four to eight weeks.

Negotiating the LOI

Where the leverage actually lives

Almost everyone treats the letter of intent as a formality and the lease as the real negotiation. That is backwards. By the time a lease draft arrives, the economics are settled and you are arguing about legal risk allocation. Every commercial term you want — and every term you failed to raise — is set at the LOI stage.

The LOI is also where the gap between what a tenant can get and what a landlord will offer on a first draft is widest. Landlords in Los Angeles are still drafting from 2019 expectations while the market has moved substantially toward tenants.

Work the list below before you sign anything.

Clauses that cost money later

The provisions tenants sign without reading

These are standard landlord-favorable provisions. None of them are unreasonable to encounter; all of them are negotiable; each one has cost an LA tenant real money.

• Relocation rightLets the landlord move you to comparable space elsewhere in the building or complex. Common in multi-tenant office. At minimum: require comparable size and quality, landlord pays all moving, cabling, stationery and signage costs, one relocation maximum, 90+ days notice, and no relocation in the final two years of the term.
• Holdover penaltyIf you stay past expiry, rent typically jumps to 150–200% of the last month’s rate, and many leases add consequential damages if the landlord loses a replacement tenant. Given LA permitting timelines, holdover is a real risk. Negotiate to 125–150% and strike consequential damages.
• Restoration and removal obligationRequires you to return the space to its original condition at your cost. On a heavily built-out suite this can run tens of thousands of dollars at the exact moment you are paying to move. Negotiate a written waiver of restoration for improvements the landlord approved, and get the approved plans attached as an exhibit.
• Uncapped CPI escalationFlagged repeatedly as one of the biggest 2026 lease risk exposures. If you cannot get fixed escalations, cap CPI at 4% annually.
• Personal guaranty with no burn-downCommon for young companies and small tenants. Push for a burn-down — the guaranty reduces or terminates after 24–36 months of on-time payment — or a capped “good guy” guaranty limited to a fixed number of months’ rent if you vacate properly.
• Assignment and subletting restrictionsMany leases let the landlord withhold consent at their sole discretion, or recapture the space entirely if you request to sublet. Require consent “not to be unreasonably withheld, conditioned or delayed,” carve out transfers to affiliates and successors from a merger or sale, and strike recapture rights or limit them to full-premises assignments.
• Exclusive use — or the absence of oneRetail only, and critical. Without an exclusive, your landlord can lease to a direct competitor two doors down. Define the exclusive by specific use and product category, not vaguely, and include a remedy: rent reduction or termination right if it is breached.
• Co-tenancy — or the absence of oneRetail. If the anchor that drove your site selection goes dark, a co-tenancy clause gives you reduced rent or a termination right. Landlords resist; it is worth pushing on in a soft center.
• No SNDAA subordination, non-disturbance and attornment agreement from the landlord’s lender protects your leasehold if the property is foreclosed. Without it, a foreclosure can extinguish your lease. Given how many LA office assets are under debt stress, this is not theoretical right now.
• Operating hours and HVAC definitionsBuried in the services section. Confirm the building hours, the after-hours rate, and whether the rate is fixed or “as reasonably determined by landlord.”

Los Angeles-specific requirements

What is different about leasing here

Parking ratios. The deal-killer that surfaces late. Older LA buildings frequently carry ratios under 2.5 stalls per 1,000 RSF, and code-required parking for your use may exceed what the building can supply. Confirm the legal parking count against the certificate of occupancy, not the striping in the lot. Nonconforming parking limits what uses the building can legally support.

Zoning and permitted use, in writing. Get confirmation that your specific use is permitted as of right in that zone before you sign. Los Angeles industrial zoning runs mostly M1 and M2 with pockets of MR and CM, and outdoor storage, noise levels, hours and parking each carry separate limits. If your use requires a Conditional Use Permit, that is a months-long discretionary process with a public hearing and no guaranteed outcome — and it must be resolved before you are committed to rent.

Change of occupancy classification. Converting retail to restaurant, or office to medical, triggers a change of use and a separate certificate of occupancy inspection, plus likely fire sprinkler and alarm upgrades to current thresholds.

ADA compliance. California is among the most litigated ADA environments in the country, and tenant improvements trigger current accessibility standards regardless of what existed before. Path of travel, restrooms and entry are the usual triggers. Negotiate clearly who bears the cost of bringing common areas into compliance — it should be the landlord.

Title 24 energy standards. California’s energy code is triggered by significant alterations. A repositioning that assumes cosmetic work often turns out to require lighting and HVAC upgrades that were not in the budget.

Seismic retrofit status. The City’s mandatory soft-story and non-ductile concrete retrofit ordinances affect a large share of older LA inventory. Confirm the building’s compliance status. An outstanding order means disruptive work during your tenancy and, depending on the lease, potential pass-through of costs.

Power capacity. Increasingly the binding constraint on industrial and advanced manufacturing space. Confirm available amperage and service capacity with LADWP or the relevant utility before committing — upgrades can take many months and are frequently not the landlord’s obligation.

By property type

What changes across office, industrial and retail

Office

Full-service gross, base year, load factor, parking, and after-hours HVAC are the five items that determine whether an office deal is good. Terms typically run five to ten years, and lease lengths have been increasing as tenants lock in current conditions.

The flight to quality is real and it cuts both ways. Trophy and Class A product is materially outperforming — trophy vacancy has run near 13.4% against a market total above 17% — so leverage is thinner at the top. The value is in well-located Class B space in submarkets with elevated vacancy, where landlords are competing hardest.

Industrial

Triple net, clear height, power, dock configuration and truck court are what matter. Institutional landlords generally want minimum three-to-five year terms; five to seven gives you the most leverage on rate, TI and options.

Clear height is now a pricing input, not a feature. Assets at 32 feet clear trade roughly 50–75 basis points tighter than legacy low-clearance buildings in the same submarket, and that differential shows up in lease rates too. If your operation genuinely needs 24 feet or better in an infill location, that is the product with no replacement supply behind it — move earlier and expect less flexibility.

Pass-throughs on LA industrial typically run $0.15–$0.30 PSF/month. A building quoted at $1.40 with $0.30 in pass-throughs costs more than one quoted at $1.50 with $0.16. Run every option on the loaded number.

Retail

Triple net, and the pass-throughs are higher and more variable than industrial. Percentage rent, exclusive use, co-tenancy, permitted use language, signage rights and hours of operation are the clauses that matter most.

Delivery condition is the single biggest swing in a retail deal. A former restaurant shell with grease interceptor, hood and ducting in place is a completely different economic proposition from a vanilla box in new construction, even at the same rate and the same TI allowance. Price the delivery condition, not the rate.

Renew or relocate

Replacing a tenant costs a landlord considerably more than retaining one — new TI, leasing commissions, downtime, and marketing. That asymmetry is your leverage in a renewal, and it exists whether or not you intend to move.

The mistake is renewing without testing the market. A tenant who has not toured alternatives has no comparable data, and the landlord knows it. Run a genuine search even if you strongly expect to stay: it costs you touring time and it produces the comps that price your renewal.

Things worth modeling before deciding:

The full cost of moving. Build-out shortfall, moving, cabling, furniture, downtime, dual rent during overlap, new signage and stationery. On a mid-size office requirement this is frequently a six-figure number, and it is the reason renewal often wins even at a slightly higher rate.

Space efficiency. Your current footprint was sized for a headcount and a working pattern that may no longer apply. Many LA tenants are renewing into meaningfully less square footage at a higher rate and paying less in total.

Blend and extend. If you are mid-term and the market has moved, a landlord may agree to reduce your current rate in exchange for extending the term. This is common right now in LA office and it is worth raising even when your expiry is years out.

What you would give up. Renewals rarely come with meaningful TI or free rent unless you ask. If you are staying, ask for a refresh allowance and abatement anyway — the landlord is still avoiding a vacancy.

Frequently asked questions