The late summer lull in the Los Angeles office real estate market offers options for nearly all office investors. Savvy entrepreneurs are reaching for value-added strategies, while distressed office property opportunities continue to evaporate. Marcus & Millichap’s Third Quarter Office Research Report reasons that buyers are appreciating assets with breakeven revenue on current rent rolls and the potential for a 10% return, while loan underwriters remain squarely focused on current operating revenues.
The Third Quarter Office Research Report also offers the following highlights.
■ During the most recent 12-month period, deal flow in the Westside Cities climbed by 28%, as activity in the Class A sector more than doubled. The average square feet per transaction rose by nearly 50%. The median sales price was $398 per square foot, representing a year-over-year price increase of 4%.
■ Healthy improvement in operations, along with rising prices, put downward pressure on cap rates. During the past year, average cap rates were in the low-6% range, down 30 basis points from the prior period.
Surprisingly, office rents in L.A.’s Westside Cities are more than 35% above the county’s other regions…
■ At midyear, average asking rents for available space were $39.69 per square foot. By year-end 2013, average asking rents in the Westside Cities will reach $40.36 per square foot, an annual climb of 2.4%.
■ Rents for available Class A space were $41.78 per square foot in the second quarter, a 1.6% gain from last year. Class B/C asking rents were quoted at $35.53 per square foot in the second quarter, up 3.6% from last year’s midpoint.
High prices in the Westside Cities encourages buyers to utilize leverage when acquiring properties. As a result, rising interest rates could have a more pronounced impact on sales in the region. This is a benefit to the owner-users marketplace, who are taking advantage of SBA loans with interest rates under 5%.
For more information please contact Jodi Summers and the SoCal Investment Real Estate Group @ Sotheby’s International Realty – firstname.lastname@example.org or 310.392.1211, and let us move forward together.
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