The Future Looks Bright for L.A.’s Commercial Real Estate Market

The Future Looks Bright for L.A.’s Commercial Real Estate Market

The robust commercial real estate market in the Los Angeles metro area is expected to continue for years to come, according to the Winter/Spring 2018 Allen Matkins/UCLA Anderson Forecast California Commercial Real Estate Survey released in January, 2018. While the biannual survey predicts the continued decline in the retail sector due to increased demand for e-commerce, the panel remained optimistic about L.A.’s office, industrial and multifamily sectors. Bolstered by Trump’s recent tax overhaul, continued job growth and a healthy gross domestic product, the demand for commercial real estate in Los Angeles County looks like it will remain bullish for the foreseeable future.

Silicon Beach Leads the Way in the Office Market

The recent rise in gaming, video streaming and tech jobs that have flooded Silicon Beach are the driving force behind renewed demand for commercial office space in L.A. With over 500 tech startups in beach cities such as Playa Vista, Santa Monica, Venice and Culver City as well as a scattering of incubators and accelerators, Los Angeles’ west side is now the third most prominent outpost for startups in the U.S. As companies like Snapchat, Hulu, Google and YouTube flock to the beach, vacancies for commercial office space have decreased while prices continue to increase.

E-Commerce Driving Need for Industrial Spaces

The industrial sector, driven mainly by increased demand for distribution spaces and warehouses, is predicted to maintain steady growth across Los Angeles County in the coming years. The survey sites imports from Asia and e-commerce as the chief sources of industrial development with many panelists saying they have plans for new projects.

Demand for Multifamily Rentals Grows Amidst Decline in Homeownership

The survey also predicts a rise in the southern California multifamily home market. Due to new federal tax break limits; homeownership remains an expensive proposition for many California residents, paving the way for increased demand for rental properties. Also fueling demand for new multifamily units is an increase in job growth in L.A. and Orange Counties. Two-thirds of panelists report that they plan to develop new rental properties in California.

Overall, the survey expects a bright future for commercial real estate in Los Angeles and southern California, signaling a shift from previous reports. The survey, given to an anonymous panel of commercial real estate executives, attempts to forecast the next three years in the industry.