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CBRE Study: Investors Bouncing Back Fast

Investment volumes are up 30 percent; multifamily assets are solid; and prices for office, retail and industrial have remained stable.These are some of the findings highlighting a new CBRE Group real estate analysis of investment capital.The data, which compares investment activity from January through July of this year with the same period last year as well as with previous years, paints the picture of a generally rosy rebound – although every rose has its thorns.Eric Willett, research director of Pacific Southwest Research at CBRE, noted in his report that investment volumes in the first half of this year have improved considerably in the North Los Angeles region and throughout Southern California, totaling more than $20 billion – a 30 percent increase from the same period the year before.

Willett saw “a very strong rebound” year over year.

“Commercial real estate investors throughout Southern California have put the pandemic in the rearview mirror,” Willett said. “This is certainly a marker of confidence in the region’s commercial real estate prospects.”Last year was a “nadir,” Willett said, adding that “we are seeing a recovery, but the extent of the recovery is uneven.”Though a significant improvement, overall investment volumes still lag behind levels achieved in 2019. The study found that although office and retail investment volumes have dipped year-over-year as a result of the pandemic, prices for both asset classes have remained relatively stable compared with other economic downturns.

Investors are increasingly investing in certain types of products, such as single-tenant retail, and not as much in larger big box or regional malls, Willett said.On the office side, there is a similar dynamic.“Creative office or production-oriented office in Burbank is still in high demand but more traditional product is receiving a more cautious looks by investors,” Willett said, citing the Empire Center office portfolio in Burbank that sold for a combined $107 million in June as an example.

According to the study, apartments remain the most attractive asset class garnering more than $6.8 billion, or 36 percent of the regional investment volume. That reflects a long-term portfolio reallocation for many investors that started before the pandemic but accelerated as a result of it. Industrial transaction volume also remains strong, with only a 9 percent decline from 2019 levels.“We’re seeing a robust bounce-back, Willett said. “Most of the impact in the heart of the pandemic was in the urban core, whereas in suburban areas such as Santa Clarita, (investments have risen) and there is demand across the board from Santa Monica through downtown Los Angeles. The investors are deeply invested in multifamily, particularly at the expense of office and retail.”Willett called the transaction of the 298-unit Warner Center apartment complex Alta Warner – now rebranded Eton at Warner Center – for $112 million, or about $375,000 a unit, “emblematic of the type of deals being done. We’re seeing deep investor interest in multifamily.”

Michael Aushenker
Michael Aushenker
A graduate of Cornell University, Michael covers commercial real estate for the San Fernando Valley Business Journal. Prior to the Business Journal, Michael covered the community and entertainment beats as a staff writer for various newspapers, including the Jewish Journal of Greater Los Angeles, The Palisadian-Post, The Argonaut and Acorn Newspapers. He has also freelanced for the Santa Barbara Independent, VC Reporter, Malibu Times and Los Feliz Ledger.
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