November 8, 2016— Los Angeles’ economy is on a growth trajectory. The region is likely to generate 27,800 new jobs in the office sector over the 2016-2017 year, one of the reasons why it is among the top destinations for real estate investors around the world, according to CBRE Group Inc.’s ‘Global Gateway Cities’–a comprehensive guide for investors seeking to acquire real estate assets in the world’s great cities.
CBRE’s Global Gateway Cities report focuses on the prime office and retail locations of 20 global gateway cities, providing perspective on key variables such as economic, occupier, supply, rent and yield trends; as well as investment activity, helping investors quickly and easily understand pricing and market conditions.
Los Angeles along with Beijing, Boston, Chicago, Frankfurt, Hong Kong, London, Madrid, Milan, Munich, New York, Paris, San Francisco, Shanghai, Singapore, Sydney, Tokyo, Toronto, Vancouver and Washington, D.C. is featured in the report as key target for international investors. These cities were selected based on size, transport infrastructure, corporate presence, real estate investment flows and several other indicators of importance.
“Global gateway cities offer many benefits to real estate investors. Their attractiveness to people and businesses means that space demand in commercial real estate markets increases steadily over the long-term, underpinning rental growth. These cities are highly liquid markets, where real estate investments can be readily bought and sold. Real estate in the global gateways provides capital protection and, in this era of low bond rates, a good income return. Lot sizes vary from CBRE Press Release small to huge, so large sums of capital can be deployed if necessary,” said Chris Ludeman, Global President, CBRE Capital Markets.
Those with money earmarked for real estate have looked to Los Angeles this year and are expected to in 2017. During the first half of 2016, $10.4 billion transacted in the Los Angeles market, a 17 percent year-over-year increase and the strongest first half in three years. Cross-border buyers represented 22.9 percent of total acquisitions in the first six months of the year, while nationally that figure remained at around 13 percent, according to a new CBRE Los Angeles Capital Markets report.
New office development in Los Angeles is modest and mostly centered around “creative” product in the hotter submarkets- a trend expected to continue as conditions tighten and supply growth remains slower than corresponding demand. According to the report, 3 million square feet of space is expected to be leased over the next two years, with 25 percent of this occupation to come from financial services, 15 percent from technology companies and 60 percent from business services.
“The LA economy has evolved into one of the strongest and most vibrant in the nation, and in the world,” said Lewis C. Horne, President of Greater Los Angeles-Orange County for CBRE. “This region is a thought-leader and that is attracting people from all across the globe. Add to that strong property fundamentals, and the result is more and more capital flowing into our market.”
The region’s retail market has also been on a growth trajectory. LA retail rents have continued to grow steadily, posting an impressive year-over-year increase of 12.6 percent. Submarkets with strengthening rents include Greater Downtown, Mid-Wilshire, West LA and South Bay. Prime rents for Rodeo Drive increased 3 percent, year-over-year, and stand at around $700 per square foot annually. Over the next two years, high street rents are anticipated to increase to beyond pre-recession peaks.
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