— By Jason Fine, Managing Director, JLL —
Situated along the Southern California coast between Los Angeles and Orange County, the City of Long Beach continues to be a strong option for businesses and residents. The city has recently delivered low- and median-income housing, in addition to luxury product, with more of each in the planning stages. This has allowed Long Beach to continue experiencing growth from aerospace, port-related businesses, oil and professional services. A few companies that have recently relocated to Long Beach include Blue Shield, Fluor, Relativity Space, SpinLaunch and Vast. Additionally, the city’s economic development department and newly elected mayor have taken a proactive stance, implementing strategies and marketing the city as a business-friendly destination.
While the regional and national office leasing trend is seeing many tenants going to a hybrid model, the Long Beach office market has seen a steady increase in vacancy and rental rates despite no new office building supply being added to the market since the pandemic. For the third quarter, the total Class A and B office vacancy (including sublease space) for downtown Long Beach is at 33 percent, with rents sitting at $2.71 per square foot, per month (full-service gross). Suburban Long Beach is 20 percent and $2.81 per square foot.
Pre-COVID, the city’s office market saw vacancy drop to 14 percent in both downtown and suburban submarkets with rents slightly less at $2.67 and $2.77, respectively. Office leasing at World Trade Center in downtown Long Beach has seen some positive momentum following its pre-COVID renovations in the interior and exterior common areas and building systems, including elevators and HVAC. The building has obtained a few new signed leases, including California Resources Corporation, American President Lines and the Long Beach Chamber of Commerce. In the suburban Long Beach submarket, Kilroy Realty recently completed renovations at Aero Long Beach, a seven-building office campus near the Long Beach Airport. The project has been popular with companies looking to upgrade their working environment in a new campus setting, as well as with firms right-sizing their square footage at a high-quality development where they can create a strong company culture. Many companies have also increased their interest in the suburbs as they hunt for space near housing and amenity-rich environments, which attract and retain employees. Morgan Stanley and Blue Shield are just two examples of top companies that have recently relocated to the suburbs for these reasons.
While the Long Beach office market has always been attractive to investors, most are sitting on the sidelines due to the rise in interest rates, as well as the uncertainty of the office leasing market. Expect more investment activity in the next 18 to 24 months as the economy stabilizes.
The Long Beach office leasing market will continue to evolve as we move into 2024 and beyond as companies finalize their plans for a return to the office and landlords invest in their properties to make them more appealing for businesses and their employees. Aerospace-related industries will continue to grow in the city given the skilled labor force, while other companies will continue to be attracted to this business-friendly city that boasts ocean breezes, abundant labor, high-quality housing and a diverse economy.