March 15, 2019
By Dennis Kaiser
Kevin Aussef, Chief Operating Officer of CBRE Capital Markets’ line of business in the Americas, shares insights on the commercial real estate investing market leading up to Connect Los Angeles. The conference is just around the corner on March 21st at the Hotel Indigo Downtown Los Angeles.
Q: Where does Los Angeles stack up in the ranking of global investment markets from an investor perspective?
A: Los Angeles continues to be one of the most wanted markets around the globe, and ranked No. 1 in the U.S. in 2018 and 2019 according to the CBRE Investor Intentions Survey, followed by Dallas, Washington D.C., San Francisco and Seattle. This bodes well for Southern California as investors are becoming more concerned about the global economy.
Q: What investment strategies are you seeing being deployed across the primary commercial real estate asset classes?
A: The sectors that are attractive are industrial and multifamily. Industrial took the No. 1 spot from multifamily in 2017 and remains in the top spot, followed by multifamily, office, retail and hotels. Notwithstanding some of the headwinds facing retail, the same percentage of investors are looking for retail product year over year. With regards to office, flexible space and its effect on values remains a hot topic this year. One of the trends is capital’s appetite for secondary markets such as Orlando and Nashville, as well as alternative investments in Healthcare, Life Science, Data Centers, Infrastructure, etc. since they offer more upside for growth.
Q: What are the concerns you see on the horizon that investors should be watching?
A: When asked about the biggest threat to property markets in 2019, investors ranked global economic impact on real estate values for the third consecutive year, followed by interest rates. We’ve had the great fortune of having a very healthy U.S. economy combined with a healthy global economy. By looking at the global landscape, particularly China and Brexit, it’s not hard to see why investors are paying attention to select markets where strong economic fundamentals are sustainable fueled by job formation and rent growth. According to RCA, total market volume has been generally flat in the past four years. That said, prices have continued to climb in most asset classes and markets, with the exception of retail. Pricing challenges, coupled with late cycle market conditions, continue to push out hold periods in the financial models.
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