Los Angeles · Market Guide · Q2 2026
Los Angeles commercial real estate.
Office vacancy hit 16.4% in the second quarter of 2026 — and 28.6% in Miracle Mile, and 5.6% in Southeast LA. That five-fold spread is the most important thing to understand about this market. There is no “LA rate.” There are forty submarkets that happen to share a county.
Let’s talk about your propertyIndustrial tells a different story than office. Asking rents are down 32% from their 2023 peak, but leasing hit 11.2M SF last quarter — the strongest since 2021. Tenants who waited out the correction are signing now, and the South Bay just posted its highest quarterly leasing volume on record.
This guide covers what those numbers mean if you are actually transacting: how to read a full-service rent against an NNN rent, what is negotiable right now, where cap rates are clearing, which submarket fits which use, and the transfer tax that changes the math on any City of Los Angeles sale above $5.4M. Every figure is sourced and dated. It is revised quarterly, within two weeks of the major research houses publishing.
LA Commercial Market at a Glance
- Office vacancy
- 16.4% Direct. Up from 15.8% a year ago. ▲ 60 bps
- Office asking rent
- $3.50 PSF/month, full service. Flat year over year.
- Industrial vacancy
- 6.0% Long-term average is 3.2%. Historically loose.
- Industrial rent
- $1.37 PSF/month NNN. ▼ 6.2% YoY, down 32% from peak.
- Retail vacancy
- 5.7% The steadiest of the three sectors.
- Industrial leasing
- 11.2M SF Strongest quarter since Q2 2021.
The market in Q2 2026
Office · Industrial · Retail
Three sectors, three different cycles. Office is still finding a floor. Industrial has finished correcting and is starting to tighten. Retail barely moved. Treating “commercial real estate” as one market will lead you to the wrong conclusion in at least two of the three.
Office: 16.4% vacancy, and why you will see 25% quoted elsewhere
Direct office vacancy reached 16.4% in Q2 2026, up from 16.0% in Q1 and 15.8% a year earlier. Including sublease space, total vacancy is 17.8%. Average direct asking rent held at $3.50 PSF per month full-service, unchanged both quarter over quarter and year over year, with Class A at $3.75.
Net absorption turned negative at −243,000 SF, driven by a large give-back on the Westside. Leasing activity was 4.5M SF, down 12.4% from Q1 but still ahead of the 3.8M SF recorded in Q2 2025. Roughly 2.31M SF is under construction, concentrated in build-to-suit and premier Class A — Century City Center and the Apple LA Campus account for much of it.
LA remains a national outlier. Vacancy tightened in more than half of major U.S. markets last quarter; LA’s went the other way. The reason is tenant composition. Streaming, tech and entertainment firms have been far slower to return to office than the financial and legal tenants driving absorption in New York and Dallas — and LA has a lot more of the former. That divide shows up inside the county too: Century City is pulling tenants in while Downtown and Hollywood empty out.
Office Vacancy by Submarket
The spread is the story. A single “LA office vacancy” number hides a five-fold difference between the tightest and loosest submarkets. Southeast LA at 5.6% is a landlord’s market. Miracle Mile at 28.6% is not. If you are negotiating a lease, the citywide average is the least useful number available to you.
Submarket asking rents range just as widely — from $2.29 PSF near LAX to $5.05 in West Los Angeles. The largest sale of the quarter was Douglas Emmett’s acquisition of the Bedford Collection in West LA for $260M, or $1,085 per square foot. The largest lease was 78,064 SF at Media Studios Phase IV in the Burbank/Glendale/Pasadena submarket.
What this means if you are leasing office
You have leverage almost everywhere, but not equally. In a submarket above 20% vacancy, landlords are competing on concessions rather than face rate — expect meaningful free rent and TI allowances, and expect the asking rate to stay stubbornly flat while the effective rate drops. In Century City or Southeast LA, that leverage largely does not exist. Establish which market you are actually in before you set your negotiating strategy.
Why You Will See Five Different Vacancy Rates
All five of these are Q2 2026 LA office vacancy. All five are correct. They differ because the firms are not measuring the same thing:
Geography. Kidder Mathews tracks a tighter LA definition; Colliers and Newmark report Greater Los Angeles, which pulls in weaker outlying submarkets.
Inventory floor. Some data sets include buildings under 20,000 SF, some do not. Small buildings lease differently.
Sublease space. “Direct” excludes it. “Total” includes it. In LA that gap is currently about 140 basis points.
Owner-occupied and conversions. Newmark notes owner-user sales and residential conversions are pulling its average down as buildings leave the competitive set entirely.
Which one should you use? For a lease negotiation, none of them — use your specific submarket’s rate. For an investment thesis, pick one house and stay with it across quarters so your trend line means something. Mixing sources between quarters will invent movement that did not happen.
Industrial: the correction is over, but rents have not recovered
Long Beach moved 9.9 million TEUs in 2025. The Port of Los Angeles moved roughly 9.5 million, up about 2% on the year and well above pre-pandemic levels. That volume is why LA industrial vacancy sat near 3% for most of the last decade, and why the region still cannot build its way out of demand — there is essentially no developable land inside the infill ring.
Vacancy today is 6.0%, up from 5.6% a year ago and nearly double the long-run average of 3.2%. Asking rents are $1.37 PSF NNN, down 6.2% year over year and roughly 32% from the Q2 2023 peak. That is the correction.
It appears to be ending. Q2 2026 recorded +4.0M SF of positive net absorption, the highest quarterly figure since 2021, against only 184,000 SF of new deliveries. New leasing totaled 11.2M SF, up 20.7% from Q1 and the strongest quarter since Q2 2021. First-half leasing reached 20.5M SF, up 31.6% year over year. The South Bay posted its highest quarterly leasing volume on record, driven largely by advanced manufacturing.
Rent context matters here: despite the correction, asking rates are still well above pre-pandemic levels, up from $0.91 PSF/month in 2019 to $1.37 today. Submarket averages range from $0.75 in Lakewood to $3.00 in Arcadia/Temple City.
What this means if you need industrial space
You still have leverage, but less than six months ago, and it is disappearing fastest at the top of the quality range. If your requirement is 24-foot clear or better in an infill location, that is the product with no replacement supply behind it — move early. If you can work with older, lower-clearance buildings in port-adjacent submarkets like Long Beach or Carson, rents there have corrected hardest and landlords are still competing.
Retail: the steadiest of the three
Retail vacancy is 5.7%, up just 20 basis points year over year. Average asking rent is $2.77 PSF per month, down 4.9% annually. Under-construction space fell to 642,736 SF, a 23.2% year-over-year decline.
The construction number is the one to watch. Los Angeles has added an average of only about 180,000 SF of retail annually over the past decade, with demolitions nearly offsetting new deliveries. Developers strongly favor adaptive reuse and mixed-use over ground-up. That structural supply constraint is why LA retail vacancy has stayed near 5–6% through a period that flattened retail in many other markets — and why well-located necessity retail continues to attract investors even with soft rent growth.
The split is geographic. Suburban submarkets like Glendale and Torrance have outperformed with vacancy near 4%, while urban cores including Santa Monica, West Hollywood and Downtown have carried elevated vacancy and year-over-year rent declines.
Measure ULA: the number missing from most LA guides
City of Los Angeles transfer tax
If you are selling commercial property inside the City of Los Angeles, this is likely the largest single line item you have not budgeted for.
Measure ULA, approved by voters in November 2022 and effective April 2023, imposes an additional transfer tax on real property conveyances within City of LA boundaries. Effective for transactions closing after June 30, 2026, the thresholds are:
| Sale price | ULA rate | On a $12M sale |
|---|---|---|
| Above $5,400,000, under $10,900,000 | 4.0% | — |
| $10,900,000 or greater | 5.5% | $660,000 |
Four things about this tax are routinely misunderstood, and each of them costs money:
It applies to the gross sale price, not the gain. Basis, improvements and mortgage payoff do not reduce it. A $6,000,000 sale owes 4% of $6,000,000 regardless of what the seller paid or still owes.
It cannot be deferred through a 1031 exchange. ULA is a transfer tax, not a capital gains tax. The exchange defers your federal and state gain; it does nothing for ULA.
It applies to all property types — commercial, industrial, retail and multifamily, not just luxury homes, despite the “mansion tax” nickname.
It stops at the city line. Beverly Hills, West Hollywood, Culver City, Burbank, Glendale and Long Beach are separate municipalities and are not subject to ULA. Santa Monica operates its own transfer tax under Measure GS. This creates real pricing differences between properties a few blocks apart.
ULA sits on top of the existing Los Angeles County documentary transfer tax of 0.11% and the City of LA transfer tax of 0.45%.
That cliff has visibly changed behavior. UCLA research estimates the odds of a property selling above the threshold fell by as much as 55% after implementation. The city reported crossing $1 billion in cumulative ULA revenue in January 2026, across roughly 1,400 transactions. A statewide initiative backed by the Howard Jarvis Taxpayers Association, which would have capped local transfer taxes, qualified for the November 2026 ballot in April 2026 — but its sponsors withdrew it on 26 June 2026 under a deal with the Legislature. Nothing on the November 2026 ballot repeals or limits Measure ULA. The courts have settled too: the Second District Court of Appeal upheld the tax in December 2025 and the California Supreme Court declined review. Plan as though ULA applies, because it does.
Verify before you rely on this
ULA thresholds adjust annually with the Chained CPI, and the exemption rules have been the subject of active City Council proposals. Confirm current figures with the Los Angeles Office of Finance and your tax counsel before structuring a transaction. Nothing here is tax or legal advice.
Pricing a building you own rather than leasing one? Our LA commercial property pricing guide covers asking-rate strategy from the owner’s side, and reports the CBRE-basis figures ($4.19 PSF, 25.8% overall vacancy) alongside the Kidder Mathews basis used here.
Choosing a submarket
Where each use actually lands
The single most common mistake in an LA property search is starting with a map and a commute radius. The submarkets are specialized, and the specialization is not arbitrary — it follows infrastructure, zoning history and industry clustering that took decades to form. A logistics user in Century City and a law firm in Vernon are both paying a large premium to be in the wrong place.
Submarket Comparison
| Submarket | Leading sector | Office vac. | Rent PSF/mo | Best suited to |
|---|---|---|---|---|
| West Los Angeles | Office | 18.2% | $5.05 | Century City, Santa Monica, Culver City |
| Downtown LA | Office | 23.7% | $2.97 | Deepest concessions in the county |
| Burbank | Office | 21.3% | $4.27 | Media production; heavy sublease |
| Glendale | Office | 17.2% | $3.21 | Back office; positive absorption |
| Pasadena | Office | 13.8% | $3.57 | Professional services, healthcare |
| West Hollywood | Office | 11.0% | $4.82 | Design, media; tight and pricey |
| Miracle Mile | Office | 28.6% | $4.03 | Emptiest submarket in LA |
| San Gabriel Valley | Office | 6.9% | $2.80 | Tightest large office market |
| City of Industry | Industrial | 3.9% | $1.37 | 77.7M SF; regional distribution |
| Santa Fe Springs | Industrial | 4.5% | $1.40 | Modern product; 3PL and logistics |
| Vernon | Industrial | 6.3% | $1.23 | Last-mile, food processing |
| Torrance | Industrial | 6.4% | $1.69 | Advanced mfg; strongest absorption |
| Carson | Industrial | 6.4% | $1.50 | Port-adjacent distribution |
| Compton | Industrial | 10.0% | $1.28 | Softest infill; real leverage |
Sortable — click any column header. Office vacancy and rent figures are submarket direct rates where reported; sector and profile notes reflect tenant composition and KEYZ Commercial transaction experience rather than survey data.
Reading the table
West Los Angeles — which in most research datasets contains Century City, Santa Monica and Culver City as a single 74.5M SF submarket — asks $5.05 PSF, the highest in the county, at 18.2% direct vacancy. It also carries more leasing activity than anywhere else: 975,279 SF in Q2, roughly 29% of the market. Expensive and selective, not dead.
Downtown Los Angeles is the inverse. At 23.7% direct vacancy and $2.97 PSF it is where the deepest concessions in the county are available, and Newmark’s data shows owner-user sales and residential conversions steadily pulling buildings out of the office inventory entirely. For a tenant with flexibility on address, the value is real. For an investor, the question is whether a given building is a conversion candidate or a stranded asset — and that answer is floor-plate and window-line specific, not submarket-wide.
Burbank remains the entertainment production corridor, and its fortunes track streaming production budgets more closely than the broader office market. Rents hold up at $4.27 PSF — the highest in the Tri-Cities — but vacancy is 21.3% direct against 24.0% total, and that 270 basis point sublease gap is production tenants giving space back.
Vernon, Commerce and Carson are the infill industrial core, running 6.3%, 6.6% and 6.4% direct vacancy respectively, with essentially no developable land behind them. Compton is the outlier at 10.0% after giving back 537,350 SF in Q2 — the one genuinely soft spot in an otherwise tight infill core.
The San Gabriel Valley is the tightest industrial region in the county at 4.5% direct vacancy across 176.1M SF, and it posted the strongest Q2 absorption of any region at +721,958 SF. City of Industry alone is 77.7M SF at 3.9% vacancy and $1.37 NNN.
Full guideSubmarket-by-submarket breakdownLeasing commercial space in Los Angeles
Structures · Negotiation · Costs
Reading a full-service rent against an NNN rent
A $3.50 full-service rent and a $2.65 NNN rent are frequently the same deal. Comparing headline rates across lease structures is the most common and most expensive mistake tenants make in this market.
Full-service gross (FSG) quotes one number that includes base rent, property taxes, insurance, utilities and common area maintenance. Standard for LA office. The catch is the base year: you pay your proportionate share of any operating expense increases above the year the lease was signed, so a “fixed” FSG rent is not actually fixed.
Triple net (NNN) quotes base rent only. You separately pay taxes, insurance and CAM, typically $0.15–$0.30 PSF per month on LA industrial and $0.40–$0.90 on retail. Standard for industrial and single-tenant retail. NNN gives you visibility into what you are paying for; it also gives you the exposure when those costs rise.
Modified gross splits the difference in whatever way the parties negotiate. Because there is no standard definition, read the expense allocation clause rather than trusting the label.
Convert everything to a fully loaded number before comparing. That is what the calculator below does.
True Occupancy Cost Calculator
What is negotiable right now
With office vacancy elevated and landlords holding face rates flat, the concession package is where deals are actually being made. Kidder Mathews notes landlords continuing to offer generous concessions and tenant improvement allowances, and expects that to persist as demand stabilizes.
Free rent is the most liquid concession. On a five-year office deal in a soft submarket, several months is a normal ask.
Tenant improvement allowance matters more than most tenants realize, because unfinished space costs real money to occupy. Negotiate whether unused allowance converts to free rent — often it does not unless you ask.
Term length cuts both ways. Landlords are paying for duration right now, so a longer term buys a better rate. But industrial lease terms are already tracking above historical averages as tenants lock in the correction, which means the discount for going long is narrowing.
Renewal and expansion options cost nothing today and are worth a great deal later. A right of first offer on adjacent space is usually obtainable and rarely requested.
Escalations. Fixed 3% annual bumps are common in LA. In a tenant’s market, 2.5% is achievable, and over a ten-year term that half point compounds into real money.
Four mistakes that cost real money
Searching too late. A 10,000 SF office requirement needs six to nine months from search to occupancy once you account for touring, negotiation, permitting and buildout. Starting at ninety days means renewing in place at whatever the landlord offers, with no leverage at all.
Comparing face rates across structures. Covered above. It is the single most common error.
Ignoring parking ratios. In LA this is a deal-killer that surfaces late. Older buildings frequently carry ratios under 2.5 spaces per 1,000 SF, and parking is often charged separately per stall per month — a cost that does not appear anywhere in the quoted rent. For a staff-dense use, this can add materially to occupancy cost.
Negotiating without representation. In nearly all LA commercial leasing, the landlord pays the tenant broker’s commission out of the listing agreement. Going unrepresented does not save the tenant money; it just means the full fee goes to the landlord’s agent, who is contractually working for the other side.
Full guideCommercial leasing, start to finishBuying commercial property in Los Angeles
Pricing · Underwriting · Diligence
What cap rates are actually clearing
Pricing has repriced around a higher cost of capital rather than collapsed. Industrial, grocery-anchored retail and supply-constrained multifamily have held investor demand; legacy office has not.
| Asset type | Cap rate range |
|---|---|
| Infill industrial — Vernon, Commerce, Compton, Carson | 5.8–6.3% |
| South Bay industrial (port-adjacent) | 5.9–6.4% |
| Multifamily — Westside prime | 3.5–4.5% |
| Multifamily — mid-city (Koreatown, Hollywood, Silver Lake) | 4.0–5.0% |
| Multifamily — Valley, South LA, emerging | 5.0–6.0%+ |
| Retail — depending on class and anchor | 5.5–8.5% |
| Office — trophy Class A | ~4.5% |
| Office — Class B/C, secondary corridors | 9.0%+ |
Two details worth carrying into underwriting. Clear height is now a pricing input in industrial: 32-foot-clear assets are trading roughly 50–75 basis points tighter than legacy low-clearance buildings in the same submarket. And that 9%+ office range is partly theoretical — much of that product is being asked, not transacted.
NOI & Cap Rate Calculator
Los Angeles-specific due diligence
Standard commercial diligence applies everywhere. These items are specific to this market and are where LA deals actually go wrong.
Soft-story seismic retrofit. The City of LA’s mandatory retrofit ordinance covers wood-frame soft-story and non-ductile concrete buildings. Confirm compliance status before closing — an outstanding order carries both a capital cost and a liability exposure, and it is not always disclosed.
Rent stabilization (RSO). For any multifamily or mixed-use building with residential units, RSO status governs what you can do with rents and is the most common source of underwriting error in LA multifamily. Verify unit-by-unit rather than trusting the offering memorandum.
Measure ULA. Model it into your exit, not just your entry. A building you buy at $9M and plan to sell at $11M crosses a threshold that costs roughly $605,000 at 5.5%.
Zoning and ZIMAS. The city’s ZIMAS system is public and shows zoning, overlays, historic designations and case history for any parcel. Pull it before you tour, not after you are in escrow.
Parking. Confirm legal parking count against the certificate of occupancy, not the striping. Nonconforming parking limits what uses you can put in the building.
Title 24 and building systems. California’s energy code is triggered by significant alterations. A repositioning plan that assumes cosmetic work often turns out to require HVAC and lighting upgrades that were not in the budget.
Full guideBuying commercial property, step by stepWorking with a broker
Commercial brokerage in LA is submarket-specific in a way that is easy to underestimate. A broker who does industrial in the South Bay and a broker who does creative office in Culver City are in different businesses. Ask what the last three deals were, where they were, and what size — the answer tells you more than any credential.
Tenant representation: who pays, and what changes
In LA commercial leasing, the landlord’s listing agreement almost always provides for a cooperating broker commission. That means the tenant’s representation is paid by the landlord as part of a fee that exists whether or not the tenant is represented. The practical question is not whether to pay for representation — it is whether the fee already built into the deal goes to someone working for you or to the listing agent alone.
What a tenant rep changes in practice: access to availabilities before they are marketed, a comparison set that includes buildings the listing agent will not show you, comparable transaction data to price the concession package, and a counterparty relationship the landlord’s agent already has and you do not.
Landlord representation
On the ownership side, the work is positioning and pricing rather than exposure. With office vacancy above 16% countywide, the binding constraint is not listing visibility — it is whether the space competes on floor plate, condition, parking and concession package against everything else available in the submarket. That analysis is where vacancy periods get shortened.
Full guideTenant representation in Los AngelesFrequently asked questions
What does commercial space cost in Los Angeles?
As of Q2 2026: office averages $3.50 PSF/month full-service, with Class A at $3.75 and a submarket range from $2.29 near LAX to $5.05 in West LA. Industrial runs $1.37 PSF/month NNN, ranging from $0.75 in Lakewood to $3.00 in Arcadia. Retail averages $2.77 PSF/month.
Two cautions. Those are asking rates — with current concession packages, office deals frequently close 15–20% below asking on an effective basis. And full-service and NNN rents are not comparable without adding pass-throughs to the NNN figure — roughly $0.15–$0.30 PSF/month on LA industrial and $0.40–$0.90 on retail.
Is Los Angeles office real estate recovering?
Not yet, and it is lagging the country. Vacancy tightened in more than half of major U.S. markets in Q2 2026 while LA’s rose to 16.4% direct. Net absorption was negative at −243,000 SF. The cause is tenant mix: LA’s streaming, tech and entertainment base has returned to office far more slowly than the finance and legal tenants driving recovery in New York and Dallas.
Within the county the picture splits. Century City is absorbing tenants while Downtown and Hollywood empty. Trophy product is materially outperforming, and Class A commitments have accounted for a disproportionate share of leasing throughout this cycle.
Is industrial property still a good investment in LA?
The fundamentals held through a significant price correction. Rents are down roughly 32% from the 2023 peak, but Q2 2026 posted 4.0M SF of positive net absorption — the strongest since 2021 — against just 184,000 SF of new deliveries. Infill industrial is trading at 5.8–6.3% caps with essentially no developable land behind it.
The risk is that the correction is not finished in every submarket. Port-adjacent product in Long Beach and Carson has repriced hardest and has more supply exposure than infill.
What is Measure ULA and does it apply to commercial property?
Yes, it applies to all property types. Measure ULA is an additional transfer tax on real property conveyances inside the City of Los Angeles. For transactions closing after June 30, 2026, sales above $5,400,000 are taxed at 4% and sales of $10,900,000 or more at 5.5%, calculated on the gross sale price rather than the gain.
It cannot be deferred through a 1031 exchange, and it does not apply outside City of LA boundaries — Beverly Hills, West Hollywood, Culver City, Burbank and Glendale are separate jurisdictions. Thresholds adjust annually; verify current figures with the LA Office of Finance.
Should my business buy or lease commercial property in LA?
The question is usually about capital and time horizon rather than real estate. Buying makes sense when your space requirement is stable for ten or more years, the down payment does not compete with a higher return inside your business, and you want control over the asset.
Leasing makes sense when headcount is uncertain, when capital is better deployed operationally, or when you need a location you could not afford to buy. In the current LA office market, leasing also captures concession value that will not be available once vacancy normalizes.
How long does it take to lease commercial space in LA?
Plan six to nine months from starting a search to occupying space for a typical office or industrial requirement. Roughly: four to eight weeks touring, four to six weeks negotiating lease terms, four to eight weeks in legal, then buildout and permitting — the last of which is the most variable item in Los Angeles and routinely the longest.
Second-generation space in move-in condition can compress this substantially. Anything requiring a permit will not.
What is a cap rate, and what is a good one in LA?
Cap rate is net operating income divided by property value. It expresses the unlevered annual yield you are buying at a given price.
There is no universally good number — a low cap rate signals perceived safety and a high one signals perceived risk. What matters is whether the cap rate is appropriate for the asset class and submarket. In LA as of 2026, infill industrial clears near 6%, Westside multifamily near 4%, and secondary-corridor Class B office is asking 9% and above.
What is a triple net lease?
In a triple net (NNN) lease the tenant pays base rent plus a proportionate share of property taxes, insurance and common area maintenance. It is the standard structure for LA industrial and single-tenant retail.
Budget roughly $0.15–$0.30 PSF per month on LA industrial and $0.40–$0.90 on retail. NNN charges are usually estimated and reconciled annually, so a lease can produce a true-up bill after year end — negotiate a cap on controllable expenses if you can.
Which LA submarket is best for my business?
It depends on your use, not your preference. Entertainment and post-production cluster in Burbank, Culver City and Hollywood. Law and finance concentrate in Century City and Downtown. Tech and creative sit in Santa Monica, Playa Vista and Venice. Last-mile logistics belongs in Vernon, Commerce, Compton or Carson. Advanced manufacturing has been moving into the South Bay.
Being in the right cluster affects hiring, client access and — through lease comps — what you pay. The comparison table above is a starting point.
Do I pay anything to use a tenant representative?
In nearly all LA commercial leasing, no. The landlord’s listing agreement provides for a cooperating broker commission, so the fee exists in the deal whether or not you are represented. Declining representation does not reduce that fee — it consolidates it with the landlord’s agent, who represents the other side of your negotiation.
Talk to KEYZ
Talk to us about a specific property.
Market averages are a starting point. Pricing a real requirement — a submarket, a square footage, a timeline — takes comparable transactions the reports do not publish.