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2/13/20
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This report was provided by real estate services firm CBRE
Los Angeles continues to be a hotbed of investment activity as investors flock to the region’s robust supply of institutional assets and stable pricing. For the fourth straight year, sales volume within Los Angeles1 exceeded $28 bil. In 2019, this total established Los Angeles as the most active market for commercial real estate nationwide, according to data from Real Capital Analytics, surpassing Manhattan. The high transaction volume was driven by record-setting years for multifamily and industrial trades in the region (totaling $9.5 bil and $7.7 bil, respectively).
The shift of capital towards these asset classes reflects the increasing response of investors to macroeconomic shifts—changing demographics and the secular rise in e-commerce have proven to be tailwinds for the multifamily and industrial sectors, cementing their presence as preferred asset classes for investment. According to CBRE’s U.S Cap Rate Survey for H2 2019, cap rates for stabilized assets remain in-line with rates of the past four years across product types (between 4.0 and 4.5% for Class A multifamily and industrial), mirroring nationwide cap rate stability in the face of macroeconomic uncertainty and interest rate fluctuations.
Cross-border or foreign investment had been consistently strong in LA, but for the first time since 2012, international investors were a net seller—disposing of over $368 mil in assets. The shift can be partially attributed to Chinese activity, which declined to $64 million from a high of $1.5 bil in 2016, reflecting broader trade tensions with the U.S. and political pressures to repatriate capital. Institutional capital, though, more than filled the gap with $1.9 bil in net acquisitions, reversing a six-year period of being a net seller.
Source: CBRE Research, Real Capital Analytics, Q4 2019.
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