Flat Job Market
The Los Angeles job market mirrors statewide trends, with California’s labor market holding steady in 2025; employment is flat year-to-date, and unemployment remains elevated at 5.4%. This rate is partly due to a rapidly growing labor force, up 137,000 since January, as new graduates and returning job seekers reenter the market. Job losses have occurred in accommodation, food service, manufacturing, and especially professional and technical services, while modest gains continue in health care, local government, and construction. Transportation and warehousing, once a strong growth sector, has declined across the state, including a 3% drop in Los Angeles. While health care and government jobs are growing across regions, their reliance on public funding creates uncertainty. Connecting new workers to available jobs and addressing persistent unemployment will be key to future progress.
Vacancy is at an All-Time High
The Los Angeles office market continued to face headwinds in Q2 2025, with rising vacancy and muted tenant demand challenging overall performance. Net absorption remained negative for the twelfth straight quarter, with 129,639 square feet vacated bringing the year-to-date total to -560,688 square feet.
Leasing activity slowed considerably with just 1.4 million square feet transacted—a steep 50% decline from last quarter and nearly 36% lower than the same period last year. Direct leasing followed a similar trend dropping 46.4% quarter-over-quarter and 36.6% year-over-year as occupiers remained cautious reassessing space needs amid ongoing shifts in workplace strategy.
Capital Markets Activity Softens
Capital markets appear cautious, with high cap rates, tighter liquidity, and fewer headline industrial or office sales year-to-date in 2025. Industrial and retail deal volume remains soft across Southern California, with more pronounced distress at port-heavy submarkets due to trade policy uncertainty.
Anticipated stabilization of interest rates and investor adaptation to new policies may fuel modest re-entry—especially in industrial and value‑add multifamily assets—as the year progresses.
