Each quarter, the Downtown Long Beach Alliance (DLBA) publishes a Snapshot Report which provides empirical data about various aspects of the Downtown economic ecosystem. The quarterly reports are designed to provide key statistical information for investors, businesses and developers.
DLBA’s just-released Q2 2022 Snapshot Report focuses on the commercial office market. It reflects the impacts of the changing nature of office work due to the pandemic, and how companies and commercial property owners are adapting to the changing needs of remote workers.
“The office market is still the last sector in the commercial real estate industry that has yet to start its recovery processes post-pandemic,” said Sheva Hosseinzadeh, Vice President with Coldwell Banker Commercial Blair, a Downtown-based commercial real estate brokerage firm.
“The blended home and work environment is here to stay,” added Hosseinzadeh, who also serves on the DLBA Board. “However, we anticipate that as the interest rate continues to rise, leasing of office spaces will also continue to increase.”
Morris Mills, DLBA’s Research and Public Policy Analyst, pointed out that while local vacancy rates have increased, the three biggest office buildings in Downtown, which provide 1.5 million square feet of floor space, have a smaller combined occupancy rate than last year. Based on the report, the main driver of elevated vacancies stems from the three Class A office properties in Downtown — Landmark Square (111 W Ocean Blvd), One World Trade Center, and Shoreline Square Tower (301 E Ocean).
“In our role, we want to better understand and communicate the connection between people working in offices as a daytime population and the vitality of other locations in Downtown, such as storefronts and restaurants,” said Mills. “It’s a challenging environment and there continues to be an ecosystem at play between offices and the local economy. While it appears remote work is the norm going forward, retooling ‘traditional’ work environments to focus on collaborative spaces and improved amenities is one strategy to strengthen the daytime population in Downtown, albeit for a portion of the working week.”
Mills shared the following insights from the Q2 2022 Snapshot Report:
- Total commercial office vacancy in Downtown rose to a 20-year high of 22.4 percent, continuing a trend that began in Q1 2020. Class A properties combined represent nearly a third of total Downtown office space. Occupancy at Class B properties remained static while Class C increased 6 percent to 89 percent in 2022.
- The Downtown commercial office market also experienced negative quarterly and year-to-date net absorption. Net absorption is the sum of the total spaces leased or constructed minus any spaces vacated or demolished. With no new office construction and no spaces demolished, a net decrease in space indicates that more office space was vacated than leased.
- Despite rising vacancies, Downtown office rents grew by 3.6 percent in the past 12 months, driven mostly by Class B office space, while remaining one of the most competitively priced office markets in Southern California. In addition, current large scale office building renovations (180 East Ocean Boulevard) and newly opened community work spaces, such as the BLANKSPACES Shaun Lumachi Innovation Center at 309 Pine Avenue, point to market adaptations to changing office work behavior.
- Visitor activity in Downtown Long Beach has consistently increased towards pre- pandemic levels, with May 2022 visits topping just over two million. This was only 12 percent lower than May 2019 visits, and nearly triple May 2020 visits.
To view the entire Q2 Snapshot Report, click here.
Throughout these commercial office market evolutions, Downtown Long Beach remains a competitive market for companies. DLBA will continue to work with commercial property owners, companies, and office workers to address immediate challenges, help prepare for additional economic impacts, and provide a positive force in the ongoing development of Downtown.