[citywatch]

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In Downtown Los Angeles' recovery from the pandemic, the office core is being outpaced by DTLA's hospitality and residential sectors, which are both surpassing pre-pandemic metrics.

In the first quarter of 2023, downtown’s residential and hospitality markets have become the primary drivers of economic growth in the city, according to data from the Downtown Center BID (DCBID) 2023 Q1 Market Report. Across the residential, hospitality and retail sectors, average occupancy rates have climbed, with residential numbers surpassing those in the last quarter of 2019.

Downtown L.A.'s office market continues to fall behind pre-pandemic numbers. Office vacancy was up to 23% in Q1, an 11% increase year-over-year, according to the DCBID report. Some bright spots remain for the downtown office market with significant lease signings in Q1. Media company Conde Nast signed a 25,000-square-foot lease to relocate its offices to Row DTLA in the Arts District, and Silverstein Properties signed a 19,000-square-foot deal at U.S. Bank Tower for McKinsey and Co., a relocation from Century City.

While office occupancy has struggled, occupancy across Downtown L.A.'s hospitality market has grown nearly 9% year-over-year, the DCBID report found — boasting a 67% occupancy rate that neared pre-pandemic highs. The average daily revenue hit $225, 4% higher than in the fourth quarter of 2019.

The residential market downtown is operating above pre-pandemic levels, DCBID found, nearing record highs for both occupancy and lease rates. Despite apartment occupancy seeing a 1.4% decrease and 1.5% decrease in average rent for apartments year-over-year in Q1, DTLA’s residential market saw an 8.4% higher occupancy rate than in Q4 2019 and saw rents average 5.3% higher than Q4 2019 at $3.39 per square foot.