Los Angeles Medical Office Market Sees Strong Sales but Limited Rent Growth Ahead
Los Angeles' medical office market demonstrated robust activity in 2024, with medical outpatient sales surging by 30 percent to exceed 650,000 square feet., according to JLL. This growth was driven by significant transactions, including purchases by UCI Health and UCLA Health, which capitalized on strategic acquisitions such as UCLA Health's takeover of West Hills Hospital and UCI's acquisition of Lakewood Regional Medical Center. Despite this momentum, the market's vacancy rate decreased to 9.1 percent, and while rents showed a modest increase, forecasts suggest that rent growth may be limited in 2025 due to competition from general office landlords.
The strong sales came as vacancy dipped by 120 basis points to 9.1 percent. The Mid-Wilshire and Mid-Cities submarkets had the lowest rates, at 5.2 percent and 5.5 percent respectively. Downtown Los Angeles had the highest vacancy by far, at 21.9 percent.
Total absorption in the market was positive at 121,790 square feet in 2024, with +66,848 square feet recorded in the last three months of the year.
Rents returned to positive gains. In 2024, they averaged $3.72 per square foot, up from the $3.68 in the previous year after they declined from $3.70 in 2022. The Westside submarket posted the highest rents at $4.63 per square foot, while Antelope Valley had the lowest at $1.86 per square foot.
However, JLL is pessimistic about rent growth going forward.
"As owners of medical outpatient buildings continue to compete for tenants with general office landlords in many Los Angeles submarkets, we forecast that rental rates will not experience significant growth during 2025," it said.
However, JLL did not provide a wider outlook for the rest of the medical office sector in LA.
Source: GlobeSt/ALM