Remember the lofty days of office real estate prior to gas hikes and the Great Recession? Six years ago you couldn’t find a decent office building in Los Angeles, and prices surged…then the plunged. Now they’re stepping out of the basement…or perhaps gliding. Analysts say class A office buildings may set the pace for investment sales through the end of the year. Already class A office sales have rebounded after average-per-square-foot prices fell to about $248 per square foot.
Los Angeles is recovering well enough. The median county-wide asking price for office properties is $265 per sq ft, while metro L.A. office is boasting a current median price of $311 per sq. ft. This is an increase of +15.3% compared to last year’s prices.
Part of our growth can be contributed to increased employment. The year-over-year change showed an increase of 223,900 jobs (SA) in California, which equates to a growth rate of 1.5%, slightly below the national rate of 1.6%. The state’s private sector added 236,300 jobs over the year, while government employment declined by 12,400 jobs.
In Los Angeles County, the seasonally adjusted unemployment rate in August rose to 10.1% from 9.9% in July. A year ago, the unemployment rate stood at 10.9%.
According to analysis from Jones Lang LaSalle, renewed investor interest in Class A office property in the first half of 2013 was bolstered by overseas investors, taking advantage of discounted prices following the recession. Capital from Germany, the Middle East and South Korea has been particularly evident in primary markets.
“With institutions, private equity, high-net-worth individuals and foreign investors all in aggressive pursuit of commercial real estate, transaction activity in the United States should remain brisk and continue to grow,” said Jay Koster, Americas president for capital markets at Jones Lang LaSalle. “In particular, we expect office sales transactions to significantly boost volume in the second half of the year, with activity propelled by improving employment growth within the technology, health care and energy sectors.”
The volume of properties available for sale in the Los Angeles area is another factor that should contribute to a rising price point. The total dollar volume of office real estate for sale is down -15.5% from a year ago.
Colliers said it sees the greatest opportunities in the ‘intellectual capital,’ energy and education markets. These include technology and education hubs such as Los Angeles’ Silicon Beach, as well as San Francisco, Silicon Valley, Austin, Boston and Raleigh-Durham; not to mention energy hubs like Houston and Denver.
It’s going to take time for office real estate to rise to its pre-recession highs – meaning there is value to be had for buyers.
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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