Los Angeles is expected to have another solid year of commercial real estate investment sales volume. Last year, Los Angeles had the highest sales volume in the US with $28 billion in total sales activity, according to research from CBRE, and this year, sales volume should at least match if not exceed the sales activity last year.
"All indicators suggest that sales activity in 2020 will be in-line with—or slightly above—the volume of the last several years," Eric Willett, director of research at CBRE, tells GlobeSt.com. "Healthy economic growth nationally and in Southern California should support a broad range of real estate fundamentals, and as one of a handful of gateway markets, the region will continue to be a cornerstone of investors' real estate portfolios."
In 2019, multifamily and industrial were the clear leaders in investment activity, accounting for $17.2 billion of the total investment activity. In 2020, those asset classes will remain the leaders in the investment market. "Moving forward, we expect sustained rebalancing towards multifamily and industrial in response to macroeconomic trends," says Willett. "Additionally, we are already seeing signs that the region's frenetic content-creation pace is driving magnified investor interest in regional office space."
Office and retail, on the other hand, are less attractive to investors. This has been a trend for several years and is a national trend as well. For retail, this is largely because of popularity of online shopping, which has driven retail investment down and industrial investment up. "The rise of e-commerce has been fundamentally disruptive to the retail landscapes and has dampened investor enthusiasm for retail assets," says Willett. "While the sector's dislocation may be temporary, investors are increasingly rebalancing their retail portfolios to divest of underperforming holdings and shore-up retail winners."
For office, pricing has hit peak levels, making it a less attractive late cycle play. "The transaction volume for office partially reflects a cyclical pricing reality for investors," says Willett. "As regional cap rates office space remain at or near all-time lows, currently hovering between 3.5% and 4.5% for trophy assets, rising prices in the office markets have winnowed the field of available buyers and tempered investment activity."
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Kelsi Maree Borland
