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Commercial Real Estate Investment: Los Angeles Is on the Rise

Commercial Real Estate Investment: Los Angeles Is on the Rise

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Commercial real estate is a great investment. Or at least it can be. Admittedly, its possible to lose money on a commercial property. The causes vary from low market demand at the time of sale to poor economic conditions, short sale and more.

However, some of these conditions present opportunities as well. It takes knowledge and experience to seize these opportunities and use them to your advantage.
Commercial property in Los Angeles is on the rise once again. Office, retail and industrial space are all showing low vacancy rates and rising rents. Many sectors of the Los Angeles commercial property suffered following the recession from 2007 – 2009. High unemployment and a suffering economy made it hard for landlords to demand rent increases.

However with the Los Angeles economy recovering, rents are once again rising. A large part of this rise can be attributed to improving job creation numbers. Job growth across Los Angeles County grew by 3% in past twelve months. Population in the Los Angeles is also strong with a 4% annual rise expected between 2013 and 2018. The average household income in Los Angeles now stands at $80,900.

The improving job market means that consumers are increasingly willing to open up their wallets. This has led to demand for retail space as shoppers return to the malls and local stores. It is also having an effect to the industrial sector as businesses are now looking for additional warehouse space.

Until relatively recently corporate clients had a strong negotiating position when looking to rent Class A real estate because landlords were desperate to find tenants. However,those times are well behind us. In Los Angeles the ability for tenants to find bargain priced Class A property is well and truly gone. Demand is now more than meeting available supply which is pushing rents upwards in the office market.

Below we will look at each area of the Los Angeles commercial property market in more detail. Highlighted are some of the reasons why certain sectors have been performing particularly well. We will also draw attention to the “hot” lower Westside market that has recently seen a significant amount of development and an influx of entertainment and technology based companies.

Highlights of the Los Angeles Commercial Property Market

Vacancy rates of 3.6% for Industrial property well below national averages

Demand for fulfillment space is driving demand for industrial property

Single tenant retail space have vacancy rate of only 3.4%

Lower Westside booms as technology and entertainment companies enter the area

Unemployment in Los Angeles dropped to 9.6% from 11.1% a year ago

Demand outstrips supply as planned construction fails to keep pace

20 million sq. feet of industrial space expected to be demanded by businesses in the near future

Vacancy rates for strip centers drop by 40% basis points in the last quarter

Los Angeles Economy and Jobs

Over the past 12 month Los Angeles has seen in a 1.1% increase in the number of available jobs. This equates to 44,100 new jobs being created. There has also been a rise in employment with unemployment dropping to 9.6% from 11.1% a year ago. While this brightened the employment picture in Los Angeles there are still some gray clouds in the sky. The entertainment sector saw heavy job cuts with more than 15,000 people losing their job. While many companies continue to lay off staff, particularly in the banking and legal industries this has not led to an over supply of office space .