Los Angeles

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LOS ANGELES—In 2016, the L.A. office market hit its peak. Theoffice investment market broke the record for a 10-year total salesvolume, with a total of $9.6 billion in sales volume, according toa joint study between Commercial Café andYardi Matrix. The spike in activity was even more impressiveconsidering that 2015 saw a decrease in sales volume, and 2014, theprevious peak, raked up only $6 billion in sales volume bycomparison.

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“The L.A. office market experienced a bounce back year in 2016after a slight decline in 2015 in sales volume and total squarefeet,” Chris Nebenzahl, a senior analyst at Yardi, tellsGlobeSt.com. “Strong demand for office space was generated fromcontinued employment growth especially in sectors such as educationand health services and financial activities. The continuedrevitalization of Downtown L.A. has increased demand for assets andincreased commercial property valuations.”

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In addition to the spike in sales volume, average price persquare foot reached a five-year peak. Prices per square footclimbed 39% to an average of $430 per square foot. Notable salesinclude 2700 Colorado Ave. in Santa Monica, which Oraclepurchased in November for $368 million; a class-A complex onWilshire Blvd., which a joint venture between Douglas Emmett andQIA purchased for $1.3 billion; and Blackstone's disposition of$2.9 billion in office assets. Overall, the majority of thepurchases took place in the most typically active office markets.“Investment activity was concentrated in submarkets includingDowntown, Santa Monica, Westwood, Jefferson Corridor, Pasadena, andGlendale,” says Nebenzahl. “Transaction activity was splitrelatively evenly between class-A and class-B properties.”

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While multifamily and industrial have been the stars of the L.A.market, especially this cycle, this upswing in office could be agrowing trend. “The multifamily sector may slow down and there maybe a period of softness for rent growth as the significant newcompletions from 2016 and 2017 are absorbed,” adds Nebenzahl. “Thesoftness that occurs will likely be felt on a submarket level, asmost new construction is concentrated downtown.”

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This year, the study expects market demand to remain high with aforecast that investment volume will break the 2016 record. “As aglobal city with strong fundamentals and demographic trends, bothforeign and domestic investors will turn to L.A. as a strong andstable market for commercial real estate,” says Nebenzahl.

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Los Angeles

|

LOS ANGELES—In 2016, the L.A. office market hit its peak. Theoffice investment market broke the record for a 10-year total salesvolume, with a total of $9.6 billion in sales volume, according toa joint study between Commercial Café andYardi Matrix. The spike in activity was even more impressiveconsidering that 2015 saw a decrease in sales volume, and 2014, theprevious peak, raked up only $6 billion in sales volume bycomparison.

|

“The L.A. office market experienced a bounce back year in 2016after a slight decline in 2015 in sales volume and total squarefeet,” Chris Nebenzahl, a senior analyst at Yardi, tellsGlobeSt.com. “Strong demand for office space was generated fromcontinued employment growth especially in sectors such as educationand health services and financial activities. The continuedrevitalization of Downtown L.A. has increased demand for assets andincreased commercial property valuations.”

|

In addition to the spike in sales volume, average price persquare foot reached a five-year peak. Prices per square footclimbed 39% to an average of $430 per square foot. Notable salesinclude 2700 Colorado Ave. in Santa Monica, which Oraclepurchased in November for $368 million; a class-A complex onWilshire Blvd., which a joint venture between Douglas Emmett andQIA purchased for $1.3 billion; and Blackstone's disposition of$2.9 billion in office assets. Overall, the majority of thepurchases took place in the most typically active office markets.“Investment activity was concentrated in submarkets includingDowntown, Santa Monica, Westwood, Jefferson Corridor, Pasadena, andGlendale,” says Nebenzahl. “Transaction activity was splitrelatively evenly between class-A and class-B properties.”

|

While multifamily and industrial have been the stars of the L.A.market, especially this cycle, this upswing in office could be agrowing trend. “The multifamily sector may slow down and there maybe a period of softness for rent growth as the significant newcompletions from 2016 and 2017 are absorbed,” adds Nebenzahl. “Thesoftness that occurs will likely be felt on a submarket level, asmost new construction is concentrated downtown.”

|

This year, the study expects market demand to remain high with aforecast that investment volume will break the 2016 record. “As aglobal city with strong fundamentals and demographic trends, bothforeign and domestic investors will turn to L.A. as a strong andstable market for commercial real estate,” says Nebenzahl.

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Kelsi Maree Borland

Kelsi Maree Borland is a freelance journalist and magazine writer based in Los Angeles, California. For more than 5 years, she has extensively reported on the commercial real estate industry, covering major deals across all commercial asset classes, investment strategy and capital markets trends, market commentary, economic trends and new technologies disrupting and revolutionizing the industry. Her work appears daily on GlobeSt.com and regularly in Real Estate Forum Magazine. As a magazine writer, she covers lifestyle and travel trends. Her work has appeared in Angeleno, Los Angeles Magazine, Travel and Leisure and more.

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