Los Angeles
Los Angeles County has the highest sales volume in the country. According to a recent report from CBRE, the county had $28 billion in total commercial real estate sales volume in 2019, the highest in the nation. The activity is on trend with the sales average for the last four years in the market.
"Los Angeles's nation-leading sales volume reflects converging economic fundamentals that collectively position the region as one of the most attractive locations for real estate investment globally," Eric Willett, director of research at CBRE, tells GlobeSt.com. "Much has been made of the city's unparalleled talent pool, international reach, dynamic industries, and robust economic growth, and these factors continue to cement Los Angeles as a gateway market with few national peers. More specifically, the region's capital market activities in 2019 were fueled by record-setting activity in the industrial and multifamily sectors. Together these two asset classes comprised nearly 60% of the region's total transaction activity—a new high."
No surprise, industrial and multifamily were the most popular investment asset classes. Industrial sales accounted for $7.7 billion of the total sales volume, compared to $4.9 billion in 2018. "Industrial and multifamily have been the clear winners over the last cycle, benefitting from both space market and capital market tailwinds. Industrial activity has primarily been driven by investors looking to capitalize on the explosive growth in e-commerce," says Willett. "In many ways industrial is the new retail. Growing from less than 5% at the beginning of the decade, e-commerce now represents nearly 12% of all retail sales. With consumers increasingly demanding two-day or next-day delivery, logistics facilities ranging from bulk warehouses to last-mile distribution sites are key links in the 21st century supply chain."
Multifamily, on the other hand, led activity with $9.5 billion of the total sales volume, but growth was relatively flat year-over-year. "A unique demographic convergence has underpinned the multifamily sector's outsized transaction activity. The aging millennial and boomer cohorts coupled with a secular trend nationwide towards rentership has created a supply and demand imbalance that is favorable for investors," says Willett. "This is particularly true in a market like Los Angeles, where housing construction has substantially lagged demand for over a decade, creating strong uplift for occupancy and rental rates. In 2019, around 12,000 new rental units were completed, barely enough to keep up with population and job growth not to mention pent-up demand. On the capital market side, the relative stability of multifamily assets—over the long run the asset class has seen the least variability in returns—is driving an increasing allocation to apartments."
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Kelsi Maree Borland
