In a survey of global real estate investors, the L.A. area ranked as one of the top choices for buying property this year. In a survey, it was estimated that global real estate investors have a combined total of $1.7 trillion to spend in property investments in 2017. Other cities high on the list for investment were London, and Sydney, Australia. All-around, the most favored real-estate categories were offices, warehouse distribution centers, multifamily residential buildings, shopping centers, hotels and industrial properties.
“L.A. has been waiting for this moment for a long time,” said Lew Horne, president of Southern California and Hawaii for CBRE Group Inc., the Los Angeles based real estate services company that conducted the survey to be released this week.
According to the LA times, among the participants were investment fund managers, insurance companies, and operators of pension and sovereign wealth funds. As stated by the CBRE Global Investor Intentions survey, L.A. was the top choice for investment in the U.S. for two years in a row, and San Fransisco had ranked number one in the region two years prior. It was said that forty percent of investors intend to spend more this year than they did last year, while 16% said they would spend less.
While the outlook for commercial real estate investment seems to be more positive than it was in 2016, we are currently in the eighth year of global economic expansion. Property values have gone up every year since 2009, suggesting the market may continue to peak. Only 15% of investors said that property is overpriced and that bubble conditions exist. Of greater concern was the fear that interest rates could rise faster than expected (21%) or that a vast “global economic shock” could undermine demand from renters (22%).
Los Angeles is in a more favorable point in its real estate cycle than other markets, said Todd Tydlaska, a CBRE broker who specializes in investment property sales. “Rents in other markets have really run up” in recent years, he said. “L.A. was late to the recovery and still has room for rent to rise.
“Property prices in Los Angeles are also considered a bargain by international standards, Tydlaska said. “L.A. is still a value compared to San Francisco.”
Although investors remain steady on Los Angeles, it could be hard to top the volume of money spent there last year, he said, when some enormous deals took place. Among the biggest was the $1.34-billion purchase of four Westwood office buildings by local real estate investment trust Douglas Emmett Inc. and the Qatar Investment Authority. In following was the $511-million purchase of the Colorado Center office complex in Santa Monica by Boston real estate investment trust Boston Properties Inc. Lastly, was the $429-million purchase of two Playa Vista office buildings by New York landlord Edward J. Minskoff Equities Inc.
All three were in the midst of the 50 largest office deals in the country last year, according to real estate software provider Yardi Systems Inc. “Los Angeles’ office market reigns supreme as the main target for investment on the West Coast,” Yardi said in a report.
The Westside, where those and other big sales took place, is the L.A. area’s core market for investment according to CBRE, partly because it consistently commands the highest rents in the region. But downtown Los Angeles, which has seen billions of dollars worth of investment from Chinese and Canadian firms in recent years, is also growing in appeal to U.S. developers with experience in other cities were old neighborhoods have already been transformed, Horne said.
He expects more investment in once-neglected blocks such as L.A.’s Arts District and Historic Core.