Which asset classes arelenders after? It is a toss-up between apartment product andindustrial. In a market like Los Angeles, the decision is eventighter, because industrial product performs so well in thismarket. Institutional lenders particularly have become more vocalabout looking for industrial deals and increasing their exposure toindustrial product. As apartment product shows tighter yields,industrial may quickly become the preferred asset class in LosAngeles.

“The industrial market is definitely popular,” BryanShaffer, a principal and director at George SmithPartners, tells GlobeSt.com. “If you surveyed 20institutional lenders and asked where they wanted to put theirmoney, I think that industrial is the place where people want toput money into. Several of the big lenders have requested moreindustrial because it is so stable.”

Equity investors are also finding industrial product moreattractive, and for similar reasons. Industrial offers healthyyields and continues to perform well in the Los Angeles market, butapartment yields have continued to tighten, offering less of anupside for equity capital. “The only area where we saw a pull backlast year was with equity investors because they weren't seeingmuch upside. At a certain level, how much better can you make aproperty,” adds Shaffer. “If you think the best properties are$500,000 a unit, and you are buying at $450,000 a unit, there isn'ta lot of movement to create value. That might be the one area wherewe see equity investors look at other asset classes or stay on thesidelines. I think that will be offset by family offices, but wewill have to see.”