Los Angeles: The Favored City Among Investors

LOS ANGELES—Los Angeles is the favored city among investors for 2016, beating out New York, Dallas and San Francisco, according to the CBRE Americas Investor Intentions Survey 2016. The report also showed a general increase in investor sentiment, with 65% of investors looking to be net buyers over 60% in 2015.

Petra Durnin, the director of research and analysis in Southern California at CBRE, wasn't surprised to see Los Angeles top the list. “We have had really strong fundamentals and really high prices per square foot on properties, but when you compare yourself with a primary market like New York, it looks like small achievements,” she tells GlobeSt.com. “When we started looking at the secondary markets like Los Angeles, we began to see a very strong story. To see that we actually came in first before New York was a pleasant surprise.”

Last year, in the same survey, Los Angeles was ranked number four among investors. This year, New York came in at number two, followed by Dallas and San Francisco, taking the four-ranked position. That was surprising, considering San Francisco's strong investment reputation in the market and the fact that it ranked first last year. “I think that is largely because of the tech scene,” adds Durnin. “People are asking, 'how long will this continue,' and there is quite a lot of sublease space coming to the market from some companies that perhaps have leased more space than they could grow into. We just don't have that here in Los Angeles. We don't have the million-square-foot contiguous tech companies that are leasing out massive campuses.” Toronto, Seattle, Atlanta, Washington DC, Denver and Boston filled out the remaining top 10 positions on the list.

Value-add investment classes also lead the pack in terms of types of investments investors were after. Multifamily remains the favored product type, with office and industrial nearly tying and retail lagging in last place. The strong investor sentiment was surprising, considering the global volatility at the end of the year, and Durnin still thinks that there will be a slight slow down over last year. “I think that everyone is tapping the breaks a little bit because of the forecasted slow down,” she says. “The fundamentals are so much stronger in L.A. and we have so much more job growth, and I think there is room for value growth compared with primary markets and even some secondary markets that might be plateauing.”

Overall, though, the fundamentals are strong for another strong year, says Durnin, even if there is some slow down in the market. “Compared with 2015, which was a phenomenal year, we will see a bit of a step down in that kind of growth, but the fundamentals will still be strong,” she says.

LOS ANGELES—Los Angeles is the favored city among investors for 2016, beating out New York, Dallas and San Francisco, according to the CBRE Americas Investor Intentions Survey 2016. The report also showed a general increase in investor sentiment, with 65% of investors looking to be net buyers over 60% in 2015.

Petra Durnin, the director of research and analysis in Southern California at CBRE, wasn't surprised to see Los Angeles top the list. “We have had really strong fundamentals and really high prices per square foot on properties, but when you compare yourself with a primary market like New York, it looks like small achievements,” she tells GlobeSt.com. “When we started looking at the secondary markets like Los Angeles, we began to see a very strong story. To see that we actually came in first before New York was a pleasant surprise.”

Last year, in the same survey, Los Angeles was ranked number four among investors. This year, New York came in at number two, followed by Dallas and San Francisco, taking the four-ranked position. That was surprising, considering San Francisco's strong investment reputation in the market and the fact that it ranked first last year. “I think that is largely because of the tech scene,” adds Durnin. “People are asking, 'how long will this continue,' and there is quite a lot of sublease space coming to the market from some companies that perhaps have leased more space than they could grow into. We just don't have that here in Los Angeles. We don't have the million-square-foot contiguous tech companies that are leasing out massive campuses.” Toronto, Seattle, Atlanta, Washington DC, Denver and Boston filled out the remaining top 10 positions on the list.

Value-add investment classes also lead the pack in terms of types of investments investors were after. Multifamily remains the favored product type, with office and industrial nearly tying and retail lagging in last place. The strong investor sentiment was surprising, considering the global volatility at the end of the year, and Durnin still thinks that there will be a slight slow down over last year. “I think that everyone is tapping the breaks a little bit because of the forecasted slow down,” she says. “The fundamentals are so much stronger in L.A. and we have so much more job growth, and I think there is room for value growth compared with primary markets and even some secondary markets that might be plateauing.”

Overall, though, the fundamentals are strong for another strong year, says Durnin, even if there is some slow down in the market. “Compared with 2015, which was a phenomenal year, we will see a bit of a step down in that kind of growth, but the fundamentals will still be strong,” she says.