As of August, the labor market recovered nearly half the jobs it lost in February and April. CBRE expects this bounce back to continue with overall economic losses limited to 5% nationally in 2020. Additional federal fiscal stimulus, if passed, would mitigate any anticipated economic weakening.
Market fundamentals weakened over the past two quarters as activity mostly halted from March onward. While vacancy increased between Q1 and Q3 2020 by 250 bp, 25.3% of that increase attributed to sublease space. CBRE EA’s Baseline forecast expects Los Angeles to have supply and demand growth at a balanced rate as the market recovers, with office vacancies recovering within 7 quarters of the start of the downturn or by 2022. Given the balanced fundamentals entering this crisis, the region's office market is expected to recover more quickly than in previous recessions.
While the office sector is taking longer than initially expected to recover, signs of improvement are beginning to emerge. Touring activity across the region picked up, and several large leases went into contract this quarter, expected to sign early Q4 2020.