High prices and stagnant vacancy rates might be driving office investors to consider other markets. Tim Lee of Olive Hill Group—an activity Los Angeles office investor—says that the firm is looking for better yields outside of the Los Angeles market this year. The firm is looking in other Western markets and heading to the Mid-Atlantic, which has proven to be a strong market.
“Finding good yields is still a challenge for us,” Lee, VP of Corporate Development and Legal Affairs at Olive Hill Group,” tells GlobeSt.com. “We are focusing on mid-market value-oriented office deals, and we are looking beyond the Los Angeles area to find those deals. We are also working more with partners in those areas to source those deals.”
The firm is looking in markets that have been popular for apartment investors for the last few years, like Seattle and Denver, as well as the Mid-Atlantic market. “We are looking in the Pacific Northwest and Denver, as well the Bay area,” says Lee. “We are also looking in the Mid-Atlantic as well. It is rumored that is one market where Amazon's second headquarters might land. Either way, that DC mid-Atlantic area has proven to be a great market to be in.”
The impetus to look in other markets has a lot to do with pricing, but Lee says that the firm is also concerned about overbuilding. “We are looking at overbuilding in some markets,” he says. “For instance, the vacancy rate in Downtown Los Angeles hasn't moved in the right direction. There is a backlog there, and that is a market that we are active in. We are concerned about overbuilding in certain core markets.”
While the firm is shifting the geographic focus in its acquisition strategy, it is still focused on creative-style office space and tech and media tenants to driving leasing in buildings. “We are focused on the tech and media tenants,” explains Lee. “Those are the tenants that are leading the market right now in terms of needing extra space. If you look at the fourth quarter deals, they are mostly tech companies with Apple and Amazon taking extra space on the Westside. The first big re-signings this year have also been media companies. That is where we continue to focus and where we think the biggest growth is going to be this year as well.”
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Kelsi Maree Borland
