LOS ANGELES—In 2016, the L.A. office market hit its peak. The office investment market broke the record for a 10-year total sales volume, with a total of $9.6 billion in sales volume, according to a joint study between Commercial Café and Yardi Matrix. The spike in activity was even more impressive considering that 2015 saw a decrease in sales volume, and 2014, the previous peak, raked up only $6 billion in sales volume by comparison.

“The L.A. office market experienced a bounce back year in 2016 after a slight decline in 2015 in sales volume and total square feet,” Chris Nebenzahl, a senior analyst at Yardi, tells GlobeSt.com. “Strong demand for office space was generated from continued employment growth especially in sectors such as education and health services and financial activities. The continued revitalization of Downtown L.A. has increased demand for assets and increased commercial property valuations.”

In addition to the spike in sales volume, average price per square foot reached a five-year peak. Prices per square foot climbed 39% to an average of $430 per square foot. Notable sales include 2700 Colorado Ave. in Santa Monica, which Oracle purchased in November for $368 million; a class-A complex on Wilshire Blvd., which a joint venture between Douglas Emmett and QIA purchased for $1.3 billion; and Blackstone's disposition of $2.9 billion in office assets. Overall, the majority of the purchases took place in the most typically active office markets. “Investment activity was concentrated in submarkets including Downtown, Santa Monica, Westwood, Jefferson Corridor, Pasadena, and Glendale,” says Nebenzahl. “Transaction activity was split relatively 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 a growing trend. “The multifamily sector may slow down and there may be a period of softness for rent growth as the significant new completions from 2016 and 2017 are absorbed,” adds Nebenzahl. “The softness that occurs will likely be felt on a submarket level, as most new construction is concentrated downtown.”

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

LOS ANGELES—In 2016, the L.A. office market hit its peak. The office investment market broke the record for a 10-year total sales volume, with a total of $9.6 billion in sales volume, according to a joint study between Commercial Café and Yardi Matrix. The spike in activity was even more impressive considering that 2015 saw a decrease in sales volume, and 2014, the previous peak, raked up only $6 billion in sales volume by comparison.

“The L.A. office market experienced a bounce back year in 2016 after a slight decline in 2015 in sales volume and total square feet,” Chris Nebenzahl, a senior analyst at Yardi, tells GlobeSt.com. “Strong demand for office space was generated from continued employment growth especially in sectors such as education and health services and financial activities. The continued revitalization of Downtown L.A. has increased demand for assets and increased commercial property valuations.”

In addition to the spike in sales volume, average price per square foot reached a five-year peak. Prices per square foot climbed 39% to an average of $430 per square foot. Notable sales include 2700 Colorado Ave. in Santa Monica, which Oracle purchased in November for $368 million; a class-A complex on Wilshire Blvd., which a joint venture between Douglas Emmett and QIA purchased for $1.3 billion; and Blackstone's disposition of $2.9 billion in office assets. Overall, the majority of the purchases took place in the most typically active office markets. “Investment activity was concentrated in submarkets including Downtown, Santa Monica, Westwood, Jefferson Corridor, Pasadena, and Glendale,” says Nebenzahl. “Transaction activity was split relatively 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 a growing trend. “The multifamily sector may slow down and there may be a period of softness for rent growth as the significant new completions from 2016 and 2017 are absorbed,” adds Nebenzahl. “The softness that occurs will likely be felt on a submarket level, as most new construction is concentrated downtown.”

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