Since the beginning of the pandemic, sublease office space has been in ample supply. In Los Angeles, sublease space has increased 20% in the last two months, according to a report from JLL, and the market is continuing to grow. Technology and advertising companies have contributed the most space to the growing sublease market in Los Angeles.
Of the approximately 80 new or expanded subleases, the primary industries subleasing space are technology (26%), marketing/advertising (21%), media & entertainment (14%) and legal (12%); however, when looking at the types of companies/industries, the most important factor is that the average size of these subleases is just over 20,000 square feet with only a handful of large block subleases and as such, it has been the small to mid-sized companies in those industries that have born the brunt of the economic downturn as it relates to sublease activity,” Josh Wrobel, managing director at JLL, tells GlobeSt.com.
While technology and advertising companies have contributed the most amount of space, expanding entertainment companies are less likely to add space to the market. “In the last decade, with Los Angeles’ second Golden Age of Hollywood in full swing as a result of the Platform versus Studio content wars, a great majority of the 10 million square feet of growth has come more from media and entertainment companies—lead by the FAANG related content expansion—as opposed to the technology based industries,” Wrobel says. “As such, the companies in Los Angeles that could be signaled out as potential land-banking candidates have yet to put any space on the sublease market.”
There is some concern about how this sublease space will be absorbed because of new remote work policies; however, Wrobel says that the nature of Los Angeles work environments will continue to rely on in-office workspace models. “Los Angeles is a creative hub, and I believe that creativity is often the direct result of a collaborative work environment,” he says. “While I see certain industries being able to use work from home or remote work to limit business travel or office hours (i.e., law firms or consulting firms may not have to travel as much for depositions or to be on-site to consult), I do believe that the bulk of Los Angeles’ industries will continue to view the office as the best place to create the culture and collaboration necessary for a company’s ultimate growth.”