Los Angeles ranks as the top choice in the U.S. for international real estate investors ...."LA Times"
Los Angeles is in a sweet spot in its real estate cycle that will make it one of the top choices in the world for buying property this year, a new report says.
The L.A. area ranked No. 1 in North America in a survey of global real estate investors who have a combined total of $1.7 trillion to spend on property in 2017. Top choice cities for investment in other regions were London and Sydney, Australia.
Overall, offices are the preferred category of real estate to buy, with warehouse distribution centers and multifamily residential buildings close behind. Shopping centers, hotels and industrial properties ranked lower in investor interest.
“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 international real estate services company that conducted the survey to be released this week.
Among the participants were investment fund managers, insurance companies and operators of pension and sovereign wealth funds.
It was the second year in a row that Los Angeles was the top choice for investment in the Americas. In the first CBRE Global Investor Intentions Survey, conducted two years ago, San Francisco ranked No. 1 in the region.
Forty percent of investors said they intend to spend more this year than this did last year, while 16% said they would spend less. Researchers caution that while the outlook for commercial real estate investment looks more positive this year than it in 2016, we are now the eighth year of a global economic expansion. Property values have risen for the most part every year since 2009, which suggests the market may be peaking.
Only 15% of respondents, however, 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 an undefined “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 are in theirs, 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 rents to rise.”
Property prices in Los Angeles are also considered a bit of a bargain by international standards, Tydlaska said. “L.A. is still a value compared to San Francisco.”
Even though investors remain bullish on Los Angeles, it may be hard to top the volume of money spent there last year, he said, when some enormous deals took place.
Among the biggest were the $1.34-billion purchase of four Westwood office buildings by local real estate investment trust Douglas Emmett Inc. and the Qatar Investment Authority, as well as the $511-million purchase of the Colorado Center office complex in Santa Monica by Boston real estate investment trust Boston Properties Inc. Another was the $429-million purchase of two Playa Vista office buildings by New York landlord Edward J. Minskoff Equities Inc.
All three were among the 50 largest office deals in the country last year, according to real estate software provider Yardi Systems Inc.
“Los Angeles’s office market reigns supreme as the main target for investment on the West Coast,” Yardi said in a report.
The Westside, where those those and other big sales took place, is the L.A. area’s core market for investment, according to CBRE, in part 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 where old neighborhoods have already been transformed, Horne said.
He expects still more investment in once-neglected blocks such as L.A.’s Arts District and Historic Core.
“The guys from New York and San Francisco have already seen this movie before,” Horne said.
"Fashion Island is returning to its classic tree lighting tradition with the annual ceremony on November 18 & 19 from 6pm – 6:30pm in the Neiman Marcus – Bloomingdale’s Courtyard. Hosted by KOST 103.5 FM’s Mark Wallengren, enjoy a 25-minute live musical performance of The Magic of Christmas starring The Young Americans. See Santa and Mrs. Claus bring the tree to life as we celebrate this special time of year. And, of course, there will be “snowfall”! Then, after the show and the tree is aglow, come visit Santa…Ho! Ho! Ho! *Blankets and low chairs will be permitted on the lawn areas on either side of the stage only. Once these areas are full, there will only be standing room available. Spots can be saved by placing blankets on a first-come, first-served basis during the day of the event. There will be a reserved seating section in compliance with ADA requirements." Courtesy of visitnewportbeach.com
The following is great projection of the housing market for 2016. The article was mostly extracted from the California Association of Realtors blog. The market will continue the pace of 2015 and maybe more.
“Home sales activities in California remained solid in September, but the growth in sales has moderated since it peaked in July. In fact, the annual increase of 6.9 percent was the lowest since February 2015. The statewide median price also continued to improve at a moderate pace, with a year-over-year growth rate of 4.3 percent in September. The mild growth rate in price was attributed partly to the shift in the mix of sales, as sales activities in lower-priced regions such as the Central Valley improved more significantly than the higher-priced San Francisco Bay Area in recent months. According to California Association of REALTORS® (C.A.R.), sales of existing detached homes will increase 6.3 percent in 2016 to 433,000, and the statewide median price will rise with an annual growth rate of 3.2 percent in 2016. Despite the anticipated improvement in the housing market condition in the upcoming year, there are some challenges and uncertainties that the economy and the housing market will face in 2016. One such unknown risk is the timing and the magnitude of the federal funds rate increase. The Federal Reserve has an opportunity to raise the rate in December before the end of 2015, but given the pace of the current economic growth, it is very likely that the Fed will begin the rate hike in early next year instead. The increase in the rate is expected to be mild and gradual throughout the next two years. Robust job growth in high-cost areas is another downside risk to the housing market. Due to the spillover effect of growth in high paying jobs, plenty of lower-paying jobs have been created, with many of these jobs being in the same geographic areas where the high paying jobs are being added. As such, income disparity in these areas could further complicate and deteriorate the housing affordability issue. Global economic issues could also begin taking a toll on economic growth later this year and next year. Slow growth in China and other European countries, coupled with stronger growth in the US, have paved the way for higher interest rates and lead to a stronger dollar. As such, international trade will likely be a drag on growth, as slower global growth and the stronger dollar soften the demand for exports, while continued strong growth in consumer spending domestically pulls in even more imports. Other potential risks that could have a negative impact on the California economy include the ongoing severe water shortage and the expected return of El Nino. Both could cause some economic losses, especially in the agricultural sector. However, the overall economic impact to the state of either risk is likely going to be small and may lead to minimal reduction in the employment growth rate for the next couple years.”
Areas like Orange County will keep attracting international funds and home prices will improve even more. Sadly, affordability will be harder to chase.