The downtown Los Angeles office market isn’t just challenging—it’s fundamentally changed. With elevated vacancy and office-to-residential conversions accelerating across DTLA, Class B and C office owners face a critical decision: reposition now or watch your asset become economically obsolete. I’ve worked in commercial real estate for over 18 years, and I can tell you that this moment represents both the greatest risk and the biggest opportunity I’ve seen for repositioning commodity office space in downtown Los Angeles.
Key Takeaways
- Downtown Los Angeles office vacancy is putting real pressure on Class B/C office owners to reposition properties or risk long-term obsolescence.
- Strategic repositioning through wellness amenities, technology upgrades, and adaptive reuse can transform commodity office space into competitive assets with stronger income.
- Phased improvements and streetscape activation offer cost-effective repositioning paths that preserve capital while increasing tenant and investor appeal.
Understanding the DTLA Office Market Crisis
The numbers tell a sobering story for any owner of a downtown office building. Vacancy in downtown Los Angeles has climbed sharply since the pandemic, with many office towers and older office properties struggling to compete with newer, amenity-rich buildings and flexible workspace options. For many owners, especially in Class B and C assets, the old “lease it as-is and compete on price” strategy just isn’t working anymore.
The downtown Los Angeles office market has also been hit by a surge in remote and hybrid work. Tenants are rethinking how much office space they truly need, how many square feet per employee make sense, and what they expect from a downtown LA office in terms of design, amenities, and location. Tenants today focus less on sheer square footage and more on experience: wellness, technology, flexibility, and connection to the surrounding district and workforce.
At the same time, there’s growing momentum behind office-to-residential conversions and adaptive reuse across DTLA. Some office buildings—especially functionally or economically obsolete assets—are now being repositioned into housing, creative space, or mixed-use projects. That shift is removing some office inventory from the market, but it also raises the bar for the remaining office owners who want to stay competitive and preserve income from their commercial real estate.
Why Commodity Office Space Requires Urgent Action
Class B and C office buildings in downtown Los Angeles are often considered “commodity” space: functional but plain, with limited amenities and dated design. These buildings usually relied on value pricing to attract tenants. In today’s market, that’s not enough. When tenants can move into a more engaging office tower or a repositioned creative office property for a similar rate per square foot, commodity space becomes the last choice on the list.
This is where the concept of economic obsolescence becomes very real. Even if the building is structurally sound, the office space can become obsolete from a market standpoint if it no longer matches how tenants work. Without better amenities, updated systems, and a stronger experience for the workforce, vacancy can become persistent rather than temporary.
For owners, the risk is simple: waiting for “better times” may just mean losing more lease prospects while downtown LA continues to change around you. Repositioning helps move a building out of the commodity tier and into a more resilient, differentiated place in the downtown Los Angeles office market. In other words, instead of racing to the bottom on rent, you create a more compelling option that tenants actively seek out.
Strategic Repositioning Approaches That Drive Results
Phased Capital Improvements
One of the most practical strategies for DTLA office building repositioning is a phased approach. Instead of trying to overhaul the entire property at once, you prioritize the improvements that tenants feel immediately:
- Fresh, modern lobbies and entry sequences
- Updated corridors and restrooms
- Better lighting and signage throughout the building
By starting with these visible, day-to-day touchpoints, you change how tenants and brokers perceive your office building from the moment they walk in. This approach also allows you to stage capital, manage cash flow, and track leasing response at each phase before committing to the next round of work.
Phase 1 might center on common areas and cosmetic upgrades. Phase 2 could focus on amenities like fitness, wellness, outdoor space, and tech infrastructure. Phase 3 might include more ambitious items such as rooftop decks, reimagined ground-floor uses, or expanded tenant lounges. The point is to keep your downtown Los Angeles office improving continuously, not just during a one-time renovation.
Wellness and Fitness Integration
Wellness has become one of the defining themes of the post-pandemic office market, especially in major urban centers like downtown LA. Tenants now expect more from their office buildings than four walls and a break room. Workplaces that support physical and mental health have a clear edge when a company decides where to locate or renew a lease.
For Class B and C office owners, you don’t need a full-service gym to start competing. Repositioning can include:
- Modest fitness rooms with quality equipment
- Showers and locker rooms for bike commuters and runners
- Multi-purpose wellness rooms for quiet breaks, nursing, or meditation
- Enhanced air quality, natural light, and biophilic design elements
Even a relatively small fitness and wellness space can dramatically increase the perceived value of your office property. These features directly support employee engagement and retention, which is exactly what your tenants talk about when they justify a move or a renewal to their leadership.
Technology and Connectivity Upgrades
No matter how historic or character-rich a downtown LA building may be, tenants still expect modern technology. The “la office” market in 2026 is increasingly defined by digital infrastructure: high-speed fiber internet, strong cell coverage, smart access systems, and efficient building management technology.
Key tech-related repositioning moves include:
- Upgrading internet and telecom capacity for high-bandwidth users
- Modernizing HVAC systems for better comfort and energy efficiency
- Introducing smart access control and visitor management systems
- Implementing tools for monitoring and managing energy use
These upgrades may not be as visually dramatic as a brand-new lobby, but they can have a major impact on leasing decisions and operating costs. Tech-forward buildings are easier to manage, more appealing to tenants in technology, media, and research, and better aligned with what today’s companies expect from commercial office space.
Streetscape Activation
In downtown environments, what happens at street level can make or break your office building’s image. Streetscape activation means turning blank or underutilized frontage into an active, engaging edge that serves both tenants and the neighborhood.
For DTLA office building repositioning, this might look like:
- Adding a café, coffee kiosk, or restaurant at ground level
- Bringing in boutique retail or service tenants that employees actually use
- Improving lighting, signage, and landscaping around the property
- Creating small outdoor seating areas or pocket plazas for tenants
This kind of activation helps reposition your office from a generic tower into a recognizable center of activity in the district. It can also support safety and comfort, which are top-of-mind concerns for many companies evaluating downtown Los Angeles as a location.
Learning from Adaptive Reuse Success Stories
Adaptive reuse has reshaped large parts of downtown LA, and even if you’re not converting your office building to residential, there’s a lot to learn from these projects. Many successful transformations preserve historic character while layering in modern amenities and flexible office space.
Key lessons for repositioning commodity office space:
- Celebrate existing character: brick, concrete, high ceilings, and big windows are assets, not liabilities.
- Mix uses thoughtfully: pairing office with retail, food, or creative studios can make your property more resilient.
- Design for flexibility: open floor plates, movable partitions, and common collaboration areas give tenants long-term options.
By borrowing elements from adaptive reuse and creative office projects, you can reposition a traditional office tower into a more interesting, experience-driven workplace—even if you’re not changing the primary use.
Calculating Repositioning ROI
Every owner wants to know: will this repositioning actually pay off? While exact numbers depend on each building and submarket, there are several recurring benefits:
- Ability to push rental rates above the commodity tier while still undercutting Class A office space.
- Shorter lease-up times due to improved appeal and better broker perception.
- Stronger tenant retention, which reduces downtime and re-leasing costs.
- Lower operating expenses from more efficient systems and smarter management.
Think of repositioning as a way to move your building into a new competitive set. Instead of battling every other dated office building in downtown LA, you join the group of properties that tenants actively consider because of their design, amenities, and user experience. Over time, that shift can significantly improve overall property value and exit options.
Competitive Positioning for Class B/C Properties
The goal of DTLA office building repositioning is not to turn every Class B or C property into a Class A tower. It’s to create a highly competitive, differentiated product that sits between basic commodity space and the top of the market.
Your repositioned building can be:
- A cost-effective option with unexpectedly strong amenities.
- A design-forward, character-rich space for creative or technology tenants.
- A convenient, wellness-focused hub for professional services firms.
By clearly defining which type of tenant you’re targeting—creative companies, professional services, startups, established midsize firms—you can prioritize the features that matter most to them. That makes your capital spend more efficient and your marketing message more focused.
Navigating the Conversion Alternative
Given the talk about office-to-residential and adaptive reuse in downtown Los Angeles, it’s smart for every owner to step back and ask: should I stay office, or should I convert?
Conversion can make sense if:
- The building’s floor plate, window openings, and structural layout work well for residential.
- The neighborhood has proven demand for housing and supportive amenities.
- Projected residential income, minus conversion costs, beats your realistic office scenario.
However, not every downtown LA office building is a good candidate. Deep floor plates, limited natural light, challenging structural grids, or complicated mechanical systems can raise conversion costs significantly. If your building doesn’t pencil out for residential, a targeted office repositioning strategy can still unlock value and stabilize income.
Implementation Timeline and Milestones
Repositioning takes planning, and it’s helpful to think in terms of clear milestones to keep the project on track. A typical timeline might look like this:
- 1–2 months: Assess the building, gather tenant feedback, study the downtown Los Angeles office competition, and define a repositioning strategy.
- 2–4 months: Work with design and engineering teams, finalize improvement plans, and secure permits.
- 2–6 months: Execute Phase 1 improvements in common areas and building systems.
- 3–8 months: Implement Phase 2 amenities such as wellness spaces, outdoor areas, and streetscape activation.
Throughout the process, communication with tenants is crucial. Explaining the plan, sharing progress, and managing disruption thoughtfully will help retain existing tenants and build positive buzz about your repositioned downtown LA office building.
Financing Repositioning Capital Improvements
Financing is often the biggest hurdle for owners of Class B and C office properties, especially when vacancy is already elevated. The good news is there are multiple ways to structure a capital plan:
- Phased improvements funded from existing cash flow to limit additional debt.
- Traditional financing or refinancing for stabilized or near-stabilized assets.
- Mezzanine capital or preferred equity partners to fill gaps in the capital stack.
- Joint ventures with experienced developers or operators who bring both capital and repositioning expertise.
Choosing the right structure depends on your current loan, equity position, risk tolerance, and long-term strategy for the asset. The key is to align financing with a realistic plan, not just a wish list of improvements.
Avoiding Common Repositioning Mistakes
Over nearly two decades working with office owners and tenants, I’ve seen a few common mistakes that can derail a repositioning effort:
- Over-improving the building for the submarket and then struggling to justify the higher rent.
- Ignoring tenant and broker feedback in favor of personal preferences.
- Renovating key spaces (like the lobby) but leaving elevators, restrooms, and corridors outdated.
- Underestimating construction timelines, budget contingencies, and the impact on tenant operations.
The most successful projects prioritize what tenants actually care about, stay disciplined on scope and budget, and maintain strong communication with everyone in the building.
The Future of DTLA Office Space
The downtown office market in Los Angeles will likely remain in transition through 2026 and beyond. Remote work is here to stay in some form, and traditional office demand has reset. But that doesn’t mean the office is dead—it means the definition of a desirable office has changed.
Winning buildings will feel more like hospitality-driven environments than simple workplaces. They’ll blend office, service, and amenity spaces in ways that support how people actually work now. They’ll integrate technology, wellness, and design to make coming into the office worthwhile for both employers and their teams.
For Class B and C office owners, this shift is both a challenge and a chance. Repositioning commodity office space in downtown Los Angeles is how you move from being part of the problem to part of the solution—and how you protect and grow the value of your property in a rapidly evolving market.
FAQs
How much does it cost to reposition a Class B/C office in DTLA?
Costs vary, but common area refreshes, tech upgrades, and basic amenities can often be phased in to match your capital budget and leasing goals.
How long before I see leasing results from repositioning?
Many owners begin to see stronger tour activity and leasing interest within months of visible improvements, with fuller stabilization typically taking longer.
Is office-to-residential conversion always better than repositioning?
No. Conversion only makes sense when the building’s layout, location, and numbers support residential; many properties are better suited for office repositioning.
Which amenities offer the best bang for the buck?
Wellness-focused spaces, improved common areas, and reliable technology infrastructure often provide the strongest and most immediate impact for tenants.
How do I start planning a repositioning strategy?
Begin with a clear assessment of your building, tenant mix, and competitive set in downtown Los Angeles, then map out phased improvements aligned with your budget and goals.
Conclusion
If you own a Class B or C office building in downtown LA, you’re at a crossroads—but you’re not stuck. With the right repositioning strategy, you can turn a commodity office into a more resilient, in-demand property that better serves tenants and investors.
I’ve spent over 18 years helping owners and business leaders navigate exactly these kinds of decisions, and I’d be glad to talk through what makes sense for your building. If you’d like a practical, no-pressure look at your options, schedule a consultation with Tolj Commercial and let’s explore what your DTLA office can become in this new market.
