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.

In a previous blog post we examined the performance of the commercial real estate market in some major US cities. This is the second article in this series, which uses data from late 2020 and early 2021 to examine vacancy and supply rates in cities such as Los Angeles, Chicago, Atlanta and Houston. These statistics illustrate the impact of COVID-19 on the commercial property rental market, as well as the types of properties that are holding strong in the face of negative trends.

Los Angeles

Los Angeles is a hub for creative, media, and entertainment companies, many of which are office-based. The city’s proximity to major cargo ports makes it convenient for logistics and distribution businesses, both of which have kept the industrial real estate market strong.

Offices

•  Vacancy rates in downtown Los Angeles are 21.5%.
•  In Q4 20202, there was more than 5.5 million square feet for vacant space, with 3.4 million feet being in the Financial District.
•  The majority of vacant inventory involves Class A offices.
•  Supply increased by more than 2 million square feet in the past 12 months.
•  No new supply is expected to enter the market as no projects are currently under construction in the CBD area.
•  Vacancy rates average 22.5% outside of the CBD, however, they reach 56% in the Fashion District.
•  Vacancy rates are just under 18% in the Greater Los Angeles area.

Read the rest of this entry »

The need for a satellite office is often a marker of business growth and success. Relocating the main headquarters and operations of a business isn’t always practical due to the time and expenses involved. As businesses evolve and expand their reach across the globe, they often require a physical presence in multiple locations, allowing them to operate effectively outside of their initial location. A multinational tech giant, such as Amazon, can be seen as a prime example of a business that utilizes satellite offices across the globe to ensure that their reach extends beyond their main Seattle office space. For many companies, acquiring satellite locations is the most feasible way of meeting growth and expansion needs, especially when there are contractual or financial limitations to how much an office can be physically expanded.

Satellite offices, also known as branch offices, tend to have a smaller footprint than their parent company. Many organizations benefit from having a network of satellite locations instead of a centralized office, creating a web of offices which allows them to operate to maximum efficiency.

Satellite offices can be in a different city, county or state from their parent company or the company’s headquarters. To determine where a satellite office should be based, factors such as the proximity to the target market, tax or financial incentives, and the area’s business or economic development climate are taken into account.

As part of the state of California, Los Angeles is renowned for its thriving business scene and strong economic indicators. The city benefits from a mature commercial real estate market that offers a great variety of alternative office spaces, usually ranking among the top five in the United States. Read the rest of this entry »

Los Angeles County is home to the nation’s second largest metropolitan area and to one of the world’s most powerful economies. The county is made up of 88 cities and has approximately 300,000 employers, which provide jobs to a workforce of nearly 5 million people.

Major Industries and Employers in Los Angeles County

Key industries include entertainment and media due to the presence of highly successful companies like Walt Disney, Warner Bros, and Paramount Pictures. Trade is also a strong economic driver due to the location of the Port of Los Angeles, situated in the southern part of the county, which is one of the state’s largest employers with over 800,000 employees.

Education and healthcare have been paramount to the local economy since the mid 20th century, as the county is home to prestigious institutions that include the University of California, California Institute of Technology, and Loyola Law School, as well as to healthcare corporations like CareMore, Health Net, and Molina Healthcare.

Other sectors worth mentioning include pharma, fashion, hospitality, tourism, financial services, and publishing. Tech-related activities have grown fast and now employ nearly 400,000 people, but the creative industry is by far the sector with the highest growth rates, supporting more than 740,000 jobs.

Key employers include CBRE, Metro-Goldwyn-Mayer, Snapchat, and Universal Pictures (Los Angeles), Walt Disney (Burbank), Riot Games and Hulu (Santa Monica), Toyota and Honda (Torrance), Isuzu Motors (Cerritos), and Avery Dennison (Glendale).   Read the rest of this entry »

Overview of Business in Los Angeles

A variety of industries help to make Los Angeles the successful economic center that it is. The city attracts businesses in the tourism, TV/film, hospitality and technology industries. These are not the only industries that thrive in the city, however. Traditional industries like law, finance and medicine also create jobs for residents in the city. Young professionals are attracted to the opportunities presented by the technology, medical and information industries.

International trade is also a major driver of the economy of Los Angeles, with its twin ports handling more than forty percent of both inbound and outbound containers for the whole country. More than one hundred and sixty thousand workers support the international trade sector in L.A. county.

Major Industries & Key Economic Drivers in Los Angeles

Technology continues to be a driving force behind the economy in L.A. and a number of major tech companies have their corporate offices in city and its surrounding areas. The information industry continues to provide numerous job opportunities for young graduates, in particular, the film and video gaming industries. The biotech industry is also combining with the information industry to create new applications that are beneficial for the health of society. Read the rest of this entry »

As tech companies offer higher pay for developers, ten cities stand out in the U.S. as the highest paying for IT jobs. San Jose, San Francisco and New York offer the highest salaries. Those who are searching for the highest paying IT jobs obviously need to head west. Statistics from the recruiting company CyberCoders points out that the average salaries in San Jose and San Francisco average $14,000 more than in third ranked New York City.

The top 10 list does contain cities scattered throughout the U.S. where lucrative jobs can be found. Major cities like Boston, Washington D.C., Dallas and Chicago are included on the list. The greatest increase in salaries has come in mobile development positions. However, IT salaries have gone up across the board in the last year. Individuals who acquire multiplatform skills and are able to design and code within the constantly changing world of mobile applications become the highest paid workers.

The cities that rank highest in pay for IT jobs in high-range, mid-range and low-range salaries are:
1. San Jose, CA
2. San Francisco, CA
3. New York, NY
4. Washington, D.C.
5. Boston, MA
6. Los Angeles, CA
7. Brooklyn, NY
8. Philadelphia, PA
9. Chicago, IL
10. Dallas, TX

The Roche Group is pushing back the frontiers of healthcare in 150 countries, employing about 80,000 workers. It has become one of the largest research-based healthcare groups. Genentech, a subsidiary, has led the biotech industry for over 30 years. They use human genetic information to develop specialized medicines for life-threatening diseases. The headquarters for Roche pharmaceutical operations are located in the U.S. Their philosophy is that the employees are their most important asset and they are dedicated to maintaining a great work place along with providing the best salaries for IT workers. Their CRM Techs provide expert technical information for Genentech’s Commercial Operations. They are responsible for maintaining project work, enhancements, and problem solutions. They work with onsite contractors and a Poland-based development team. These workers must be familiar with a variety of databases, with a strong technical foundation that includes advanced structured programming. Salary compensation for these positions is among the highest in the field.

CompuTech, located in Clarkstown, NY offers Desktop Support Tech positions with a world renowned computer manufacturing company. These are contract positions requiring backgrounds 5 years’ experience in both HP hardware and software, Windows XP and Windows 7 maintenance. Salaries are commensurate with experience and skill levels.

Similar positions may be found in any of the cities listed above. Depending on the applicant’s skills and training, and where he wants to work, high-paying IT jobs are available throughout the country.

The Three Airlines With the Best Lounges in the U.S.

Business travelers need the perks of high quality airport lounges where they can unwind and rest between flights. Space for meeting with colleagues provides an additional advantage. Competition between different airlines for business and first-class passengers means that their lounges provide the best possible amenities including massages, limos to passenger’s next flight, and five-star dining. The question then becomes which airlines actually have the best lounges? These three top the list for those in America.

The Virgin Atlantic lounges rate number one with most passengers. ‘Air America’ Business Class Lounge at Miami International Airport offers all the expected amenities desired to soothe the spirit and relax the body of passengers after their flight. The latest movies are available for viewing on wide-screen while the traveler relaxes in elegant comfort. A sauna and massage will get any passenger ready for the next leg of the journey. Read the rest of this entry »