Thank you for sharing!

Your article was successfully shared with the contacts you provided.

CENTURY CITY, CA-As the economy continues its sluggish movement toward recovery, investors in Southern California markets have responded to cautionary tales of the last decade. As a result, two trends have emerged: intense competition for core, stabilized assets has driven large institutional investors into secondary and tertiary markets; and low interest rates have propelled an influx of developers and individual investors to enter the commercial real estate market.

Large, stabilized assets typically attract institutional investors or real estate firms with extensive reach. Investors beholden to institutions or firms may have hundreds of millions of dollars or more to invest and must meet a certain return. In order to achieve a certain yield, they solicit stabilized, proven assets which can return 7% or more versus a standard < 1% on a CD or bonds. Established assets generally attract investors who aren't looking for value-add; they are focused on stabilized core assets. Lessons learned from the recession and increased competition has prompted a flight to quality assets, driving larger institutional investors to non-prime markets. Compared to five years ago, stabilized assets are at a premium with highly compressed rates. Large institutional investors are therefore being pushed into secondary, even tertiary markets. In Southern California, everyone wants to put money into core stabilized assets, pushing prices up and forcing large real estate funds to become more aggressive. Even with extremely compressed CAP rates, prices continue to rise.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?


Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.