Southern California Office Real Estate Blog

LOS ANGELES 2010 – OFFICE BUILDING REAL ESTATE PREDICTIONS

February 17, 2010 on 12:17 am | In Fascinating Office Real Estate Information, Lease Rates, Office Fodder, Statistics, Trends, Uncategorized, all |

by Jodi Summers

Put on your sunglasses, the future of the Los Angeles office market is starting to look bright. After two years of job cuts, payrolls are predicted to expand payrolls minimally in Los Angeles County in 2010, according to the 2010 National Apartment Index report by Marcus & Millichap, and the 2010 predictions of the Urban Land Institute.

Industry sages such as Xavier Gutierrez, Managing Director and Principal, Phoenix Realty Group, observes, “Los Angeles is better positioned than most areas to survive the residential and commercial real estate fallout due to its very diversified economy.  Since the 1990s, when the local economy was heavily dependent on the defense industry, LA has cemented its importance as the gateway to Asia, luring US companies that want to take advantage of foreign markets through the country’s largest port and the massive infrastructure of rail and roadways linking warehouse facilities in LA and the Inland Empire.”

Conservative investing is the tone. Marcus & Millichap suggests that “economic headwinds remain formidable…. “The recovery will be muted because of slow job growth.”

The NAI concurs, noting, “Following a loss of 115,000 jobs in 2009, payrolls are forecast to expand by 0.3 percent this year, with the addition of 13,000 positions.”

Currently, it is estimated that around 51 million square feet of vacant office space is available for lease throughout the Inland Empire and Los Angeles and Orange counties. The Los Angeles Economic Development Corporation reports that forward thinking companies in fields such as technology, entertainment and R+D are using this low rent era to upgrade to bigger or more prestigious space so they are well-positioned for the rebound.

Experts say the wild card is commercial mortgage maturities, which are in the hundreds of billions of dollars at this point.

Gutierrez is optimistic. “Private equity sources are ready to pounce on cash-generating distressed assets and just waiting for the debt markets to come back and the economy to stabilize with job losses bottoming out,” he notes.

PREQIN, which specializes in offering services for companies involved in alternative investments, suggests that given the size of Southern California’s population and economy, $173 billion of private equity capital is waiting to be invested from a worldwide set of sources.

All sources seem to conclude that there is an optimistic future for the Los Angeles office market.

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http://www.uli-la.org/node/382

http://www.marcusmillichap.com/aboutus/News/Current/020510_los_mm.asp

http://www.globest.com/news/1580_1580/insider/183133-1.html

http://www.laedc.org/

http://www.preqin.com/