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Comparing Office Space Costs: LA vs. San Francisco

Los Angeles and San Francisco are home to some of the largest and most dynamic office space markets on the US West Coast. However, there are important differences in the costs involved in setting up an office in these locations. In this article, we offer a comparative cost analysis of office lease costs between Los Angeles and San Francisco.

Los Angeles: The US creative capital

Being the nation’s creative capital, Los Angeles is a magnet for businesses looking for office space to carry out media, entertainment, design, and advertising activities.

In 2023, the city’s creative industries contributed nearly 15% of the state’s total economic output.

The majority of these businesses are located in downtown LA but also in exclusive hillside and waterfront locations, such as Hollywood, Silicon Beach, the Arts District, Playa Vista, and Burbank.

San Francisco: A global tech city

San Francisco’s business community is known for its strengths in tech and innovation, not only in the nearby Silicon Valley but also in the city’s financial district and SOMA, which are renowned tech powerhouses.

Despite its compact layout, San Francisco is one of the largest US office markets by square footage, offering space in a variety of office unit sizes and locations.

Trends affecting office costs in LA and San Francisco

In Los Angeles, the most notable trend is the surge in demand for flexible and coworking space, driven by a growing startup and freelancer population. The city is home to the second biggest flexible space market in the US. This had repercussions on the conventional office market, given the preference for flexible models and the need to downsize, which has led to record-high vacancies and decreasing rental rates.

In San Francisco and Silicon Valley, the high adoption of hybrid models and demand for satellite offices has caused an exodus from downtown offices, whose base rents have been dropping and becoming more affordable after being one of the most expensive office markets in the US until 2019. Despite this, in comparative terms, San Francisco office space is pricier than space in Los Angeles.

Comparative cost analysis

Let’s move on to a breakdown of the costs involved in leasing office space in Los Angeles and San Francisco.

1.    Base Rent

Los Angeles: Average listing rates across the LA metro area are $41 / sq ft for all office building classes. County-wide rates for Class A average $40 / sq ft and $30 / sq ft for Class B space. 

In downtown LA, base rent averages $46 / sq ft, although there are noticeable cost disparities between downtown sub-markets, with costs in Little Tokyo staying under $30 but exceeding $50 in the Fashion District. 

Outside of downtown LA, the priciest office spaces are in Beverly Hills, Century City, Hollywood, Miracle Mile, and El Segundo, all commanding average rates above $40 / sq ft. The most affordable offices are in Mid Cities, under $30 / sq ft.

San Francisco: Average base rent for San Francisco office space comes in at just under $70 / sq ft for all property classes and $54 / sq ft in the Bay Area. By building class, asking rates across the city are $58 for Class A offices, $46 for Class B, and $39 for Class C. In Silicon Valley, the average base rent is close to $60 / sq ft for Class A offices.

The priciest sub-markets (but still under $100 / sq ft) are Mission Bay, China Basin, the Financial District, and Yerba Buena. The most affordable office rents are in South of Market West and Potrero Hill, both around $50 / sq ft, and are also below average in Van Ness Corridor and Waterfront.

Despite recent rental rate declines, San Francisco remains one of the priciest US markets for large headcount and square footage requirements, and it remains oriented to large corporations.

2.    Utilities and Maintenance

The compounding factors affecting operating expenses, like office utilities and maintenance, range from office unit size, lease type, and occupancy numbers to major weather differences between both cities.

In Los Angeles, utility costs for the average small business are around $4.60 / sq ft. On the other hand, the Bay Area generally experiences higher utility costs, in particular electricity, which costs more than 67% than the national average.

3.    Taxes and Concessions

Additional costs related to property taxes may be passed to office occupiers, putting additional pressure on budgets. Although there has been a sharp decline in commercial property values in both cities due to work-form-home arrangements, these are more noticeable in San Francisco, which has led to a drop in commercial tax rates.

Concessions and incentives, such as the Tenant Improvement Allowance, can also impact overall lease costs. In Los Angeles, TIA is between $60 and 80 / sq ft, whereas in San Francisco, the average is noticeably lower at $32 / sq ft.

Rent abatements on long-term leases average 10 months in LA vs. 3 months in San Francisco.

Conclusion

Although Los Angeles generally offers more affordable office rental rates, San Francisco provides unparalleled access to a tech and innovation-oriented ecosystem. Businesses must consider their specific needs and growth plans when deciding between these two Californian office markets, to make decisions aligned with their goals and budget requirements.

Take a look at the office space available in Los Angeles and San Francisco.

Mixed-use property refers to a type of development that combines elements of residential, commercial, cultural, institutional, or entertainment-based property into a single, cohesive unit. These properties are designed to foster a closer integration of different aspects of daily life, promoting convenience, and efficiency. By bringing together various functionalities, such as living spaces, office areas, retail, and entertainment venues, mixed-use properties embody a modern, holistic approach to urban planning.

The importance of mixed-use properties in the contemporary urban landscape cannot be understated. In the context of the United States, these developments serve as catalysts for community revitalization, facilitating social interaction, reducing commute times, and contributing to a more sustainable way of living. Economically, they also often provide property owners with an attractive investment opportunity with potentially higher returns, due to the diversified revenue streams they offer.

At the intersection of this modern real estate trend, Offices.net plays a vital role in connecting businesses and individuals with the perfect mixed-use commercial spaces. With a comprehensive listing of executive office suites, shared workspaces, flexible office spaces, and more, Offices.net makes the process of finding and moving into mixed-use commercial properties in the United States as straightforward as possible. Whether you are looking for a fully equipped, turn-key small office rental or a creative shared space, Offices.net’s free search tools can help you navigate through the options available online. Read More »

Meetings are an essential aspect of corporate culture. It’s estimated that the average office worker in the US spends a third of their time in meetings, and the figures are even higher for executives and senior staff.

The widespread adoption of online communication tools has transformed the way meetings take place, prompting a debate between the merits of in-person and virtual meetings. In this article, we examine the pros and cons of in-person vs. online meetings and discuss why face-to-face interactions continue to have value.

Online meetings: Pros and Cons

In a relatively short period of time, virtual meetings have become the norm in most office-based companies. Data from 2022 shows that in just two years, the amount of time spent in virtual meetings had increased from 14 hours per week to more than 21 hours per week, matching or even exceeding the time spent in face-to-face meetings. There are several advantages and disadvantages to this virtual meeting format.

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The rise of remote work has not only revolutionized the way businesses operate, but it has also had a profound impact on the lives of employees across the United States. Allowing workers to step out of traditional office settings, remote work has opened new horizons for achieving a better work-life balance. It has provided new opportunities for collaboration, efficiency, and productivity, regardless of physical location. However, with this transformation has come a wide spectrum of reactions and adaptations, driven in part by the generation to which workers belong.

Different generations have unique and diverse perspectives on remote work arrangements. The attitudes towards telecommuting and the challenges and benefits it presents vary widely between Baby Boomers, Millennials, and Gen Z workers. These differences aren’t merely superficial; they touch on deep-seated values, technological comfort levels, expectations, and the very definition of work itself.

Baby Boomers, who witnessed the advent of personal computing and the internet, have seen work evolve dramatically over the years, from strictly in-office to increasingly flexible arrangements. Millennials, often juggling multiple responsibilities and valuing work-life balance, see remote work as a tool for managing the complex interplay between their professional and personal lives. Meanwhile, Gen Z, the first generation to grow up fully immersed in a digital world, views doing work remotely as a natural extension of their connected lives, whilst also grappling with new challenges related to professional development and social integration.

These diverse perspectives can’t be understood in isolation. They must be seen in the context of rapid technological advancement, the job market, changing cultural norms, economic pressures, and evolving organizational structures. The impact of remote work is multifaceted, affecting everything from daily routines and communication preferences to career development and long-term job satisfaction.

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Millennials and Gen Z professionals are now the largest demographic in the world of work, so it goes without saying that their views and expectations will have an impact on different corporate practices. Among these practices are issues of corporate social responsibility (CSR) and environmental sustainability, two of the hottest topics in the 21st century business world.

In this article, we will look at how both Millennial & Gen Z professionals are shaping corporate social responsibility and sustainability practices in office-based workplaces across the United States.

Seven Ways Millennials & Gen Z are Shaping CSR and Sustainability Practices

Purpose-Driven Workplaces

One of the things that characterizes the new generation of professionals is their understanding of the workplace as more than just “a place to work”. Although financial considerations still matter, Millennials and Gen Z workers expect more than just a paycheck: they want their work to have a purpose. 

For this generation, being purposeful at work equals success, matching or even in some cases exceeding the feeling of satisfaction that comes from financial gain. In fact, many Millennials would be willing to take a pay cut if their work resonates with their values. 

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When looking for new office premises, you may notice that listings advertise office space using different terms, such as usable, rentable or common area square footage. It’s important to understand what each of these terms means, so you can choose an office that suits your space requirements and budget.

In this article we look at the differences between usable, rentable, and common area square footage, and we discuss what tenants need to be aware of when evaluating and budgeting for their space requirements.

Usable Square Footage

This refers to the amount of space each tenant has exclusive access to. The specific inclusions and exclusions vary depending on whether the office in question takes up an entire floor, or the floor is shared with other tenants.

In full-floor setups, usable square footage includes every area within the floor, whether it’s used by office workers or not. This includes workspaces, restrooms, kitchens, breakout rooms, common areas, reception areas, meeting rooms, hallways, as well as rooms used for technical and janitorial purposes. The only exclusions are any areas that aren’t exclusively used by the tenant occupying that floor, such as stairwells or elevator shafts. These are part of the unit’s gross square footage, which isn’t taken into account for determining lease rates.

In multi-tenant floors, usable square footage includes workspaces and any other rooms allocated for the specific use of each tenant. For example, shared bathrooms or kitchenettes wouldn’t be included, but if each tenant has exclusive use of a restroom, this is added to the office’s total usable square footage.

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The concept of walkability is becoming increasingly discussed in urban planning and design environments, as it impacts well-being, health, livability, and real estate economics. In this article, we discuss the walkability trend in relation to the office market, and explore its benefits, as well as the amenities, data, and calculations used to generate a property’s walking score.

About the concept 

In the United States, walking scores for real estate were first published by WalkScore, a company developed in the mid 2000s by former Microsoft developers that understood the importance of walkability and its connection to quality of life. 

These WalkScore founders developed a tech-supported system that generated walkability scores for any given postcode. The overall score shows how easy and convenient it’s to live or work in a location without needing to drive or use mass transit. 

Initially, walking scores were one of the criteria used to choose a residential property, but eventually they were applied to all kinds of real estate, including offices. Nowadays, it’s common to see walkability scores displayed in real estate listings. As time went by and people became more familiar with the importance of walkability and its connection to real estate, different walkability tools and calculators appeared in the market.

How do walking scores affect real estate economics?

There’s a strong correlation between walkability and commercial real estate economics. Researchers analyzed property price trends over a decade and uncovered wide gaps in price increases between highly walkable CBD real estate (which experienced 125% price increases) and those in car-dependent areas, where prices only rose by 20%. 

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A return to the office is a reality in most US markets, but in 2023 work-from-home models are still common, since 27% of US office employees currently work from home. Not only that, but when surveyed, nearly 70% of US employees said they would prefer to work from home.

This raises an important issue for office facility managers: how to make in-person office work as attractive as the allure of the home office. In turn, this brings landlords into the equation, as they need to make their real estate offerings more competitive in a market where tenant demands have changed. In this article, we discuss the latest trends in office facilities and the best office amenities that can be found in 2023.

Latest trends in office facilities

Outdoor space

Although office work has traditionally been confined to indoor spaces, the renewed focus on air quality and overall well-being during the pandemic has brought to light the crucial role outdoor spaces play in modern corporate buildings. Research shows that access to nature and outdoor environments can improve productivity, reduce stress, and enhance creativity among employees.

Patios, rooftop decks, landscaped terraces, and other outdoor areas are rapidly becoming some of the most sought-after amenities for office workers. These physical spaces not only provide a breath of fresh air and an escape from the indoor office environment, but also foster social interactions and collaboration among employees, creating a healthier and more dynamic workplace culture.

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Commercial real estate costs have been increasing in most US urban markets for a while, which has highlighted the need to be strategic about new office space investments.

For this reason, office-based businesses are rethinking their space allocation after making changes to work models and switching to hybrid or remote work. 

Planning the optimal use of office space is a smart move. Not only can this help reduce costs, but it also ensures employees work in a more pleasant environment that is conducive to productivity and well-being. This means that office space planners are in high demand, however, not every company has the luxury of having an employee that is up-to-date on office space planning guidelines.

In this article, we look at 12 ways in which US businesses can optimize their office space planning. If you are looking to polish up on office space planning basics, then read on to find out more!

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The United States is home to one of the world’s largest commercial real estate markets, with an estimated revenue worth of approximately $1.2tr. In terms of size, industrial space is the largest sub-market with 21.7bn square feet, followed by retail with 14bn, and offices, which account for 11.8bn.

In Q1 2023, the average price per square foot for US offices was just over $38. Retail averaged out to $18.09 / square foot, and industrial space came in at just under $8 / square foot. However, there are significant variations in average prices based on location and real estate class. Here is a summary of average commercial rates in key USA cities:

•   New York: Average gross rates for metro New York offices are $77 / sq ft / year. Industrial space averages $19 / sq ft / year.
•   Los Angeles: $44 / sq ft / year for offices in the metropolitan area and $11 / sq ft / year for industrial premises.
•   Miami: In the same range as Los Angeles, at $46 / sq ft / year for offices and slightly lower for industrial space ($8 / sq ft / year).
•   Boston: $38/ sq ft / year for metro offices, rising to $80 in Cambridge. Industrial properties average $10 / sq ft / year.
•   Philadelphia: $32 / sq ft / year for city center offices, $27 for suburban space, and $6 / sq ft / year for industrial properties.
•   Atlanta: Slightly under $30 / sq ft / year for offices with a rate of $35 in Downtown Atlanta. Industrial space is charged at an average of $5 / sq ft / year.
•   Chicago: Approximately $33 / sq ft / year for office space, rising to averages above $40 in The Loop. Industrial premises average $6 / sq ft / year.
•   Dallas and other urban centers in Texas: between $25 and $30 / sq ft / year, whereas industrial rates are below $5.

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