LOS ANGELES—The office market in Los Angeles is turning out to be a hidden gem. This week, CBRE released a report that the L.A. office market was better prepared than any other US metropolitan market to withstand a major recession, and yesterday, the Swig Co. said that it is redeploying capital from San Francisco into L.A. office product. According to Tomas Schoenberg, EVP of investment at the Swig Co., the L.A. office market offers both diverse drivers and great value, making it a target market for investors.
“We love the drivers in L.A. They are a little more varied than they are in the Bay Area, which is driven mostly by tech, software and social media. In L.A., we see the drivers being multiple,” Schoenberg tells GlobeSt.com. “It is fashion, entertainment, public relations, advertising and tech. There are a lot more different and diverse economic drivers. We also like that L.A. remains a relative value to the Bay Area. It hasn't had the really large run-up in rents and value that we have experienced in San Francisco now for a while.”
The Swig Co. recently purchased the Sepulveda Center in West Los Angeles, trading out of a San Francisco office property to fund the acquisition. “We bought the Sepulveda Center at a discount to replacement cost that is much better than what we would get for similarly located similar quality buildings in the Bay Area,” Schoenberg adds.
Other investors are also taking note of the positive market dynamics, increasing competition for these properties. According to Schoenberg, the competition is also heightened by the dearth of opportunities. “For being such a huge market, not as many properties trade as we would like to see in Los Angeles,” he says. “When any property comes on the market, it receives a lot of attention and competition to acquire it. It is a very competitive market in the same way that the Bay Area is, and a lot of global capital has targeted L.A. Anyone that succeeds in buying a property in a market like this always feels like they have overpaid, but thankfully, the markets continue to grow and people want to live and work in these communities, so the market catches up.”
The CBRE report also highlighted the strength of the market, noting that these market dynamics not only make it a strong investment market but a more stable one during a recession as well. When asked if he agreed that L.A. was better positioned to withstand a downturn, Schoenberg said that is a broad-brush statement, but also said that L.A. isn't as close to its economic peak as some of the other major markets. “We often talk about where the real estate cycle is using the metaphor of a clock, and San Francisco and Silicon Valley certainly feels like it is between 9 o'clock and 10 o'clock on that clock, whereas L.A. feels more like it is 6 o'clock,” he says. “It isn't as close to the peak as we are here in Northern California.”
LOS ANGELES—The office market in Los Angeles is turning out to be a hidden gem. This week, CBRE released a report that the L.A. office market was better prepared than any other US metropolitan market to withstand a major recession, and yesterday, the Swig Co. said that it is redeploying capital from San Francisco into L.A. office product. According to Tomas Schoenberg, EVP of investment at the Swig Co., the L.A. office market offers both diverse drivers and great value, making it a target market for investors.
“We love the drivers in L.A. They are a little more varied than they are in the Bay Area, which is driven mostly by tech, software and social media. In L.A., we see the drivers being multiple,” Schoenberg tells GlobeSt.com. “It is fashion, entertainment, public relations, advertising and tech. There are a lot more different and diverse economic drivers. We also like that L.A. remains a relative value to the Bay Area. It hasn't had the really large run-up in rents and value that we have experienced in San Francisco now for a while.”
The Swig Co. recently purchased the Sepulveda Center in West Los Angeles, trading out of a San Francisco office property to fund the acquisition. “We bought the Sepulveda Center at a discount to replacement cost that is much better than what we would get for similarly located similar quality buildings in the Bay Area,” Schoenberg adds.
Other investors are also taking note of the positive market dynamics, increasing competition for these properties. According to Schoenberg, the competition is also heightened by the dearth of opportunities. “For being such a huge market, not as many properties trade as we would like to see in Los Angeles,” he says. “When any property comes on the market, it receives a lot of attention and competition to acquire it. It is a very competitive market in the same way that the Bay Area is, and a lot of global capital has targeted L.A. Anyone that succeeds in buying a property in a market like this always feels like they have overpaid, but thankfully, the markets continue to grow and people want to live and work in these communities, so the market catches up.”
The CBRE report also highlighted the strength of the market, noting that these market dynamics not only make it a strong investment market but a more stable one during a recession as well. When asked if he agreed that L.A. was better positioned to withstand a downturn, Schoenberg said that is a broad-brush statement, but also said that L.A. isn't as close to its economic peak as some of the other major markets. “We often talk about where the real estate cycle is using the metaphor of a clock, and San Francisco and Silicon Valley certainly feels like it is between 9 o'clock and 10 o'clock on that clock, whereas L.A. feels more like it is 6 o'clock,” he says. “It isn't as close to the peak as we are here in Northern California.”
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