This year, investors willprecede with cautious optimism. With strong market fundamentals,fear of a recession has subsided, but as pricing continues to climbto new peak levels, there is reason to be concerned. Industrial andmultifamily land prices are hitting new records, and constructioncosts have continued to increase, making new construction a higherrisk than before.

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"I am cautiously optimistic. We are seeing record land prices at$60 per square foot for infill land in Los Angeles and OrangeCounty and $25 per square foot in the Inland Empire," TomKenny, EVP at Bellwether Enterprise,tells GlobeSt.com. "Those numbers are peaks, and any time you hitthose, you have to start being a little bit cautious. However,investors think rents are going to continue to rise and that youcan justify a new build at high costs."

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Pricing is cause for concern because it requires more rentgrowth, and after several years of strong rent growth, rents arebeginning to plateau. "You have to have continued rent growth tosupport land and construction prices," says Kenny. "So, because weare at such a high, I can imagine that we will see less activitygoing into 2020. But, it is not because we are hitting any trouble.It is just people hitting the pause button a little bit because wehave been so busy over the last five or six years. There are a lotof people that don't want to have a misstep."

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While there is reason to be cautious in 2020, the market willlikely look a lot like it did in 2019, starting with the top assetclasses. "Multifamily and industrial will definitely dominate thisyear," says Kenny. "We are still doing a lot of business in retail.Those products have been active in financing. Retail is not goingto leap ahead of apartments and industrial, but there is stillgreat opportunity in that asset class."

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Looking ahead, Kenny is most bullish on properties in marketthat continue to see rent growth. "I get comfort in seeing actualtransactions where you are seeing rent growth and sales happen onthe demand side, not from investors but from the users," he says."If companies are doing that, then they must feel goodinternally."

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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.