The panelists were quick, however, to say that start-ups aren't a good idea for every business model. “When people say the want next cycle, a start-up isn't going to fit that profile,” said Shannon. Lapidus adds, “It is deal and project specific,” while Peterson says that investment decisions are also focused cycle patterns. “When we make investment decisions, we think about where we are in the recovery,” he explained. Maybe [an asset] won't be a five-year and we will have to look at long-term fundamentals.”

Allen Matkins

LOS ANGELES—The West Coast office market is outperforming the East Coast market, according to the experts on the investment sales panel at Allen Matkins View From the Top conference. Thanks to the tech and media markets, the West Coast has seen phenomenal job growth with low construction, making it an ideal investment market. The Allen Matkins panel was moderated by the law firm's Tony Natsis and included David Lapidus, managing director of acquisitions and development at Tishman Speyer; Devin Peterson, principal of real estate at the Blackstone Group; James Rodgers, EVP and head of acquisitions at KBS Capital Advisors; Kevin Shannon, president of West Coast capital markets at NGKF.

“What has happened over this recovery is that it has been much stronger on West coast than east coast. L.A. and Seattle are accelerating, while San Francisco is slightly slowing,” said Peterson. “Technology and media are going to be really powerful for west coast markets.”

The panelists agreed that strong office markets come down to job growth, diverse employment sectors and tenant concentration in an asset, as well as supply. Los Angeles is particularly robust because of low construction, as Peterson said, “L.A. office supply is muted at less than 1%, one of the lowest in country.” At the end of the day it comes down to the tenant concentration you have in the property,” he added. “We are focused on markets where you do see growth.” Shannon agrees, saying, “Capital follows tech and job growth. The hottest markets are those with above average job growth.”

Focusing on tenant concentration doesn't mean that landlords are limited to credit-worthy tenants that have longevity. For diversity, landlords may have to take a chance on tech start-up tenants that need the opportunity for growth. Lapidus concurs that tenant concentration is important, but says that they also have a small population of start-ups that they hope will encourage interest. “At Wilshire Courtyard, we have had a handful of start-ups and virtual reality tenants,” he said. “We take the perspective that they are a relatively small percentage of the concentration if they go under, and we hope they will bring excitement and attract other tenants. You are trading credit, but hoping to gain a brand.”

The panelists were quick, however, to say that start-ups aren't a good idea for every business model. “When people say the want next cycle, a start-up isn't going to fit that profile,” said Shannon. Lapidus adds, “It is deal and project specific,” while Peterson says that investment decisions are also focused cycle patterns. “When we make investment decisions, we think about where we are in the recovery,” he explained. Maybe [an asset] won't be a five-year and we will have to look at long-term fundamentals.”