Long Beach's office market presents one of the most complex and opportunity-rich financing landscapes in Southern California. Downtown Long Beach office vacancy has climbed to approximately 31.6%, up from around 18% in 2019, as remote and hybrid work models have fundamentally reshaped demand for traditional office space. Yet this challenging headline number masks a market that is actively reinventing itself, with office-to-residential conversions, creative office repositioning, and the emergence of the "Space Beach" aerospace technology sector creating new demand patterns and investment opportunities.
Clear House Lending provides office property financing throughout Long Beach, from conventional commercial mortgages for stabilized assets to bridge loans for conversion projects and SBA loans for owner-occupied properties. This guide covers the current state of the Long Beach office market, lending options, rate expectations, and strategies for navigating a sector in transition.
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What Is the Current State of the Long Beach Office Market?
The Long Beach office market in 2026 is defined by a stark divide between distressed segments and emerging bright spots. Understanding this bifurcation is critical for both lenders and investors.
Downtown Long Beach, which contains the city's largest concentration of office inventory, has seen vacancy reach approximately 31.6%. This represents a dramatic increase from the roughly 18% vacancy recorded in 2019, before the pandemic accelerated the shift toward remote and hybrid work. Class B and C office buildings in the downtown core have been hit hardest, with some properties sitting at 50% occupancy or below. The ripple effects extend to street-level retail that depended on office worker foot traffic, creating a compounding challenge for downtown property owners.
However, the broader Long Beach office market tells a more nuanced story. Citywide office vacancy sits at approximately 18.5%, significantly below the downtown figure. Office properties in suburban-style settings, particularly those near Long Beach Airport (LGB) and along the I-405 corridor, have maintained healthier occupancy levels. Medical office buildings throughout the city benefit from healthcare demand that is largely immune to the work-from-home trend.
The aerospace sector is creating a new category of office demand. Anduril Industries' 1.1 million square foot campus at Douglas Park will include approximately 750,000 square feet of office space alongside 435,000 square feet of R&D facilities. This project alone, expected to support roughly 5,500 jobs, represents the largest single office demand driver in Long Beach. Other aerospace and technology companies in the "Space Beach" cluster, including Boeing's retained operations, Relativity Space, and SpinLaunch, also occupy significant office and R&D space.
The downtown waterfront transformation, including the Portico mixed-use development ($150 million), the Alexan West End ($200 million), and the Downtown Shoreline Vision Plan, is attracting new residents and amenities to the area. While this investment is primarily residential and entertainment-focused, it creates secondary support for office demand by making downtown Long Beach a more attractive place to work and live.
What Types of Office Loans Are Available in Long Beach?
The range of office financing options in Long Beach reflects the market's complexity, with different products suited to different investment strategies and property conditions.
Conventional Commercial Mortgages serve stabilized office properties with strong occupancy (85% or higher) and creditworthy tenants. Rates range from 5.18% to 7.25% with terms of 5 to 10 years and 25 to 30 year amortization. In Long Beach's current market, conventional financing is most readily available for Class A buildings with committed long-term tenancy, medical office properties, and aerospace-related office space near Douglas Park.
SBA Loans are an excellent option for business owners purchasing their own office space. The SBA 504 program offers up to 90% financing with below-market fixed rates, while the SBA 7(a) program provides flexible terms. Long Beach's diverse small business community, spanning port services, aerospace suppliers, healthcare providers, and professional services, makes SBA office lending an active segment of the market.
Bridge Loans are increasingly important in Long Beach's office sector because many properties do not meet the stabilized occupancy requirements for conventional financing. Bridge financing at rates of 7.50% to 10.50% allows investors to acquire underperforming office buildings, execute renovation or conversion strategies, and refinance once the property is stabilized or repositioned.
DSCR Loans evaluate the office property's rental income rather than the borrower's personal income. DSCR programs work for stabilized office investments with reliable tenancy and adequate cash flow, but the elevated vacancy in downtown Long Beach means many properties do not generate sufficient NOI to meet minimum DSCR thresholds.
Hard Money Loans provide fast access to capital for distressed office acquisitions, auction purchases, or situations where time is more important than rate. Hard money financing at 9.00% to 12.75% can close in days, allowing buyers to secure properties in Long Beach's transitional office market before competitors.
Construction Loans fund major office renovations, tenant improvements, and build-to-suit projects, particularly relevant for the aerospace sector's specialized office and R&D requirements.
What Interest Rates Should Long Beach Office Investors Expect?
Office loan rates in Long Beach vary more widely than other property types due to the range of risk profiles in the market.
Stabilized Class A office properties with strong tenancy command rates of approximately 5.18% to 6.75%. Medical office buildings and aerospace-oriented office space near Douglas Park also qualify for competitive rates in this range due to their specialized demand drivers.
Class B office properties with moderate occupancy (70% to 85%) typically see rates of 6.50% to 7.75%, reflecting the higher leasing risk and the need for potential tenant improvements or renovation investment.
Transitional or distressed office properties, particularly in downtown Long Beach's high-vacancy environment, generally require bridge or hard money financing at 7.50% to 12.75%. The elevated rates reflect both the property's current income shortfall and the execution risk of conversion or repositioning strategies.
SBA loans for owner-occupied office properties offer some of the most attractive terms in the market: SBA 504 fixed rates starting around 5.64% and SBA 7(a) rates of 6.50% to 8.00%. For Long Beach business owners purchasing their own office space, SBA financing often provides the best overall cost of capital.
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How Are Investors Repositioning Long Beach Office Properties?
The elevated downtown vacancy has catalyzed a wave of creative repositioning strategies that represent some of the most dynamic investment activity in Long Beach.
Office-to-Residential Conversion is the most prominent strategy. With downtown apartment rents climbing and office demand falling, converting underperforming Class B and C office buildings to residential use can transform a struggling asset into a high-demand property. These conversions typically require significant capital investment, complex permitting, and bridge financing during the transition period. However, the economics can be compelling: office buildings purchased at distressed pricing can be converted to apartments that lease at $2,500 to $3,000 per month in the improving downtown market.
Creative Office Repositioning targets the growing demand for non-traditional workspace. Converting traditional office layouts into open-plan, amenity-rich creative office environments attracts technology companies, design firms, and the coworking operators that increasingly populate Long Beach's startup ecosystem. The 4th Street Retro Row corridor and the arts district have seen successful creative office conversions.
Medical Office Conversion takes advantage of healthcare's resistance to remote work trends. Converting traditional office space to medical use, whether medical suites, dental practices, or outpatient clinics, can capture a demand segment that requires physical presence. Long Beach's major healthcare employers, including Long Beach Memorial Medical Center and the VA Long Beach Healthcare System, support a strong medical office market.
Mixed-Use Redevelopment combines office retention with residential, retail, or hospitality additions. This approach works well for larger downtown properties where partial office retention can be combined with residential conversion of upper floors and enhanced ground-floor retail or restaurant space.
Which Long Beach Office Submarkets Offer the Best Opportunities?
The Long Beach office market's submarket performance varies dramatically, creating distinct investment profiles across the city.
Douglas Park and Airport Area represent the strongest office submarket in Long Beach. Anduril's 750,000 square feet of office space under construction, combined with Boeing's retained operations, aerospace suppliers, and technology companies, creates a concentrated demand cluster that is growing rather than shrinking. Office properties near LGB airport benefit from the convenience factor for national and regional tenants. Cap rates in this submarket range from approximately 6.0% to 7.0%, with lower vacancy than the downtown core.
Downtown Long Beach presents the highest risk and highest potential reward. The 31.6% vacancy means acquisition costs are at cycle lows for office properties, but the path to stabilization requires significant capital and execution skill. Investors targeting downtown should focus on properties suitable for conversion or creative repositioning rather than conventional leasing strategies. The ongoing waterfront transformation and residential developments provide long-term tailwinds.
Bixby Knolls and North Long Beach host smaller-scale professional office buildings that serve local businesses and healthcare providers. Vacancy in these suburban-style markets is significantly below the downtown level, and properties benefit from stable neighborhood demand and lower tenant improvement costs.
East Long Beach and Los Altos provide suburban office environments popular with medical practices, financial advisors, insurance agencies, and other professional services. These properties maintain higher occupancy due to the essential nature of their tenants' businesses.
What Should Borrowers Know About Office Loan Underwriting in Long Beach?
Underwriting office loans in Long Beach requires lenders to navigate the market's transitional dynamics carefully.
Tenant credit and lease term are the most important underwriting factors. Lenders strongly prefer office properties with creditworthy tenants on long-term leases. A Class A building downtown with three remaining years on a lease to a regional law firm will receive very different treatment than the same building with month-to-month tenants. In Long Beach's current environment, aerospace and healthcare tenants are viewed most favorably due to their growth trajectories.
Rent comparables require careful submarket analysis. Downtown Long Beach office rents have declined from their pre-pandemic levels, and appraisers must use current comparable transactions rather than historical rents. Lenders evaluating downtown properties will typically apply more conservative rent assumptions than what the current owner may project.
Tenant improvement allowances affect underwriting significantly. In Long Beach's competitive office market, landlords often need to invest $30 to $80 per square foot in tenant improvements to attract quality tenants. These future capital requirements reduce the property's effective cash flow and must be factored into the lender's analysis.
Environmental and seismic assessments are standard for Long Beach office properties. Older downtown buildings may require seismic retrofit, particularly unreinforced masonry structures. The city's oil industry legacy means Phase I environmental site assessments should be completed for any property near former industrial or oil production sites.
How Does Long Beach's Office Market Compare to Other Southern California Markets?
Long Beach's office market shares the challenges facing office markets nationwide but has unique characteristics driven by its aerospace sector and waterfront transformation.
Downtown Long Beach's 31.6% vacancy exceeds the broader Los Angeles metro average of approximately 22%, reflecting the concentration of older Class B and C inventory and the loss of several major tenants to remote work. However, Long Beach's aerospace-driven office demand in Douglas Park has no parallel in most LA office submarkets, creating a growth story within the broader market challenge.
Compared to markets like downtown LA (roughly 24% vacancy), Santa Monica (approximately 18%), and Orange County (around 17%), downtown Long Beach's vacancy is higher but so is the discount to replacement cost. This discount creates conversion and repositioning economics that may not be available in markets where office values have not declined as steeply.
The critical differentiator for Long Beach is the combination of the aerospace demand driver, the waterfront transformation investment, and the relative affordability of the broader market. These factors suggest that Long Beach's office recovery, while slower than some markets, has a unique trajectory supported by sector-specific demand rather than reliance on traditional office-using industries.
Frequently Asked Questions
Can I get a loan for a downtown Long Beach office building with high vacancy?
Yes, but the financing options depend on the vacancy level and your investment strategy. Properties with occupancy below 70% will typically not qualify for conventional financing and will instead need a bridge loan or hard money loan. If your plan involves converting the building to residential or mixed-use, bridge financing can cover both the acquisition and renovation period. Once the property is stabilized at its new use, you can refinance into a permanent loan at lower rates.
What is the best loan type for an owner-occupied office in Long Beach?
For business owners purchasing their own office space, SBA loans are typically the best option. The SBA 504 program offers up to 90% financing with below-market fixed rates starting around 5.64%, making it the most accessible and cost-effective program for owner-occupants. The SBA 7(a) program provides additional flexibility for properties that may not meet 504 requirements. Medical office, aerospace supplier, and professional services businesses in Long Beach are active SBA office loan borrowers.
How do I finance an office-to-residential conversion in Long Beach?
Office-to-residential conversions typically require a two-stage financing approach. First, acquire the property using a bridge loan that accommodates the low occupancy and provides renovation funding. Bridge rates of 7.50% to 10.50% with terms of 24 to 36 months allow adequate time for permitting, construction, and lease-up. Once the residential conversion is complete and the property is generating rental income, refinance into a permanent loan such as an agency multifamily loan (starting around 5.30%) or a DSCR loan (starting around 6.25%).
Are medical office properties in Long Beach easier to finance than traditional office?
Yes, medical office properties generally receive more favorable financing terms in Long Beach because healthcare tenants are considered less susceptible to the remote work trend that has disrupted traditional office demand. Medical tenants require physical space to see patients, creating more stable occupancy and predictable cash flow. Lenders typically offer lower rates, higher LTV ratios, and less restrictive covenants for medical office properties compared to traditional office buildings, particularly those in the high-vacancy downtown market.
What cap rates should I expect for office properties in Long Beach?
Office cap rates in Long Beach vary dramatically by submarket and property quality. Stabilized Class A properties with strong tenancy near Douglas Park or LGB airport trade at approximately 6.0% to 7.0%. Stabilized downtown office buildings with moderate occupancy may trade at 7.0% to 9.0% or higher, reflecting the elevated vacancy risk. Distressed downtown office buildings targeted for conversion may trade at cap rates above 10%, or more commonly at price-per-square-foot discounts that reflect the anticipated conversion cost and future use value.
Does Long Beach offer incentives for office-to-residential conversions?
Long Beach has been supportive of adaptive reuse and conversion projects as part of its downtown revitalization strategy. The city's development services department processes conversion applications, and the Downtown Shoreline Vision Plan explicitly envisions more residential density in the area. While specific financial incentives may vary, the broader policy environment is favorable toward conversions that bring residents to the downtown core. Check with the Long Beach Department of Community Development for current programs and incentives.
Contact Clear House Lending today to discuss financing options for your Long Beach office property. Whether you are acquiring a stabilized medical office, purchasing an owner-occupied space with SBA financing, or planning a downtown conversion project, our team can help you structure the optimal loan for your investment strategy.