Oracle's $368 million purchase of 2700 Colorado Avenue in Santa Monica, the highest price per square foot and the highest ever paid in Santa Monica.

This activity was fueled by employment growth, especially in the professional services sectors. “The office sector remains well supported by strong employment growth and healthy workforce demographics, as well as by strong employment from jobs in the financial activities, information, and professional and business services sectors. These sectors continue to grow faster than the national growth rate for all nonfarm payrolls,” adds Ressler.

Los Angeles isn't the only city that has seen major growth in office investment. Secondary cities, like Seattle, are also seeing a spike in office investment. “Investors seeking yield have turned to fast-growing secondary cities with robust economies, such as Seattle, Denver and Charlotte,” says Ressler. “The growing tech industry in smaller cities has driven demand for high-end office space. Many of the companies are advanced manufacturing facilities, data centers and Internet fulfillment centers. These types of companies employ more people per square foot occupied and at higher wages. However, Western and Sunbelt states are projected to see the largest gains.”

LOS ANGELES—The Los Angeles saw record gains office transaction volume in 2016. Last year, there were $9.6 billion in sales volume, setting a 10-year record, according to research from Commercial Cafe. Blackstone and Douglass Emmett were the most active investors in the market, trading more than $4 billion in office assets between the two investors. This activity shows has been driven by a combination of employment growth and investor demand for assets in gateway markets.

“Gateway markets continue to attract investors looking for strong and stable valuations, and a lack of new supply has driven rents up,” Doug Ressler, senior research officer at Yardi Matrix, tells GlobeSt.com. “Valuations have steadily grown over the past five years attracting investor interest and keeping transaction activity relatively stable. This growth underscores the geographic breadth of the economic suburban recovery.”

The record-breaking activity was surprising, considering that office sales activity in Los Angeles fell in 2015 with less than $5 billion in activity. In 2016, pricing surged by 39% per square foot to an average of $430 million. The top sales in the year included QIA and Douglas Emmett's $1.3 billion purchase of a class-A four-building complex on Wilshire Boulevard; Blackstone traded $2.9 billion in office assets; and

Oracle's $368 million purchase of 2700 Colorado Avenue in Santa Monica, the highest price per square foot and the highest ever paid in Santa Monica.

This activity was fueled by employment growth, especially in the professional services sectors. “The office sector remains well supported by strong employment growth and healthy workforce demographics, as well as by strong employment from jobs in the financial activities, information, and professional and business services sectors. These sectors continue to grow faster than the national growth rate for all nonfarm payrolls,” adds Ressler.

Los Angeles isn't the only city that has seen major growth in office investment. Secondary cities, like Seattle, are also seeing a spike in office investment. “Investors seeking yield have turned to fast-growing secondary cities with robust economies, such as Seattle, Denver and Charlotte,” says Ressler. “The growing tech industry in smaller cities has driven demand for high-end office space. Many of the companies are advanced manufacturing facilities, data centers and Internet fulfillment centers. These types of companies employ more people per square foot occupied and at higher wages. However, Western and Sunbelt states are projected to see the largest gains.”