Investors' willingness to accept lower returns prompts churn.IN what may tuna tuna or tunny, game and food fishes, the largest members of the family Scombridae (mackerel family) and closely related to the albacore and bonito. They have streamlined bodies with two fins, and five or more finlets on the back. out to be a record year for office building sales, investors in 2004 continued to drive up prices on Los Angeles Los Angeles (lôs ăn`jələs, lŏs, ăn`jəlēz'), city (1990 pop. 3,485,398), seat of Los Angeles co., S Calif.; inc. 1850. County commercial properties, despite only marginally improving rental conditions. The returns buyers are willing to accept on commercial real estate investments have grown even smaller in the past year, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. real estate economists at both USC An abbreviation for U.S. Code. and UCLA UCLA University of California at Los Angeles UCLA University Center for Learning Assistance (Illinois State University) UCLA University of Carrollton, TX and Lower Addison, TX . While final sales are still being tabulated, cumulative transaction values last year will likely top the $4.14 billion set in 2003--a high not seen since the late 1980s, according to trade publication Real Estate Alert. But vacancy VACANCY. A place which is empty. The term is principally applied to cases where an office is not filled. 2. By the constitution of the United States, the president has the power to fill up vacancies that may happen during the recess of the senate. rates and average asking rents--which ultimately determine the returns a building can generate--have remained relatively unchanged, according to fourth quarter data from Grubb & Ellis ELLIS - EuLisp LInda System. An object-oriented Linda system written for EuLisp. "Using Object-Oriented Mechanisms to Describe Linda", P. Broadbery <pab@maths.bath.ac.uk> et al, in Linda-Like Systems and Their Implementation, G. Wilson ed, U Edinburgh TR 91-13, 1991. Co. At $2.45 a foot, average L.A. County asking rents are only 2 cents higher than they were a year ago. And despite landlords countywide coun·ty·wide adv. & adj. Throughout a whole county: found at locations countywide; a countywide search. Adj. 1. filling 2.8 million square feet of vacant office space in the fourth quarter, the county's 14.8 percent vacancy level has fallen only 1.4 percent in the past year. Richard Ri·chard , Joseph Henri Maurice Known as "Rocket." 1921-2000. Canadian hockey player. A right wing for the Montreal Canadiens (1942-1960), he led his team to eight Stanley Cup championships and was the first player to score 50 goals in a Ziman, chairman chief executive of the county's biggest landlord, Arden Ar·den An unincorporated city of north-central California, a residential suburb of Sacramento. Population: 101,400. Arden, Elizabeth 1884?-1966. Realty realty n. a short form of "real estate." (See: real estate) REALTY. An abstract of real, as distinguished from personalty. Realty relates to lands and tenements, rents or other hereditaments. Vide Real Property. Inc., said real estate investors A real estate investor is someone who actively or passively invests in real estate. An active investor may buy a property, make repairs and/or improvements to the property, and sell it later for a profit. have accepted that they will have to pay more for office properties, even though the financials may not have improved much. "It's it's 1. Contraction of it is. 2. Contraction of it has. See Usage Note at its. it's it is or it has it's be ~have a new market," he said. "It's understood we can't buy buildings at the (rates) we used to. I don't don't 1. Contraction of do not. 2. Nonstandard Contraction of does not. n. A statement of what should not be done: a list of the dos and don'ts. see that changing for several more years." Changed formula In years past, buyers of commercial buildings would have expected to pay prices that would have resulted in a 9 percent return on the investment, based on a measurement of incoming rents minus costs. Today, that number has shrunk shrunk v. A past tense and a past participle of shrink. shrunk Verb a past tense and past participle of shrink shrunk, shrunken shrink to between 6 percent and 7 percent. In three recent deals in diverse L.A. County submarkets, investors accepted returns ranging from below 5 percent to less than 7 percent, according to Real Estate Alert. They are Beacon Beacon, city (1990 pop. 13,243), Dutchess co., SE N.Y., on the E bank of the Hudson River; settled 1663, inc. in 1913 when Fishkill Landing and Matteawan villages were united. Capital Partners Inc.'s $133.5 million purchase of Figueroa Plaza in downtown Los Angeles Downtown Los Angeles is the central business district of Los Angeles, California, located close to the geographic center of the metropolitan area. The sprawling, multi-centered megacity is such that its downtown core is often considered just another district like Hollywood or ; Broadway Broadway, famous thoroughfare in New York City. It extends from Bowling Green near the foot of Manhattan island N to 262d St. in the Bronx. Throughout its length Broadway is chiefly a commercial street. Real Estate Partners LLC's $151 million buy of Wilshire Not to be confused with Wiltshire. Wilshire may refer to:
1 City (1990 pop. 131,591), Los Angeles co., S Calif., at the base of the San Gabriel Mts.; inc. 1866. . Stuart Gabriel, director of the USC Lusk Center for Real Estate, said investors are willing to pay high prices because of their confidence in the market's future and easy access to low-interest financing. With the economy beginning to post positive job-growth numbers, investors are banking on companies expanding their operations in the near term. "It's a bet," Gabriel said. "It's a bet the funding environment will continue to be attractive and there will be high demand for these properties in the future." Grubb & Ellis is forecasting a tightening of the leasing market in 2005, with demand spiking by mid-year, especially in already-tight markets such as North County, Tri-Cities and Wilshire Center. "Certainly in markets with the lowest vacancy, those are the ones where things will continue to tighten and where increased demand will have the greatest effect on rents," said J.C. Casillas, Grubb & Ellis' L.A. research director. There is some danger that the prices investors are paying for real estate are too high, Gabriel said. If rents and occupancies don't improve, the values of the buildings may fall and investors could end up losing money. "It's fair to say, if nothing else, real estate markets are priced to perfection Adv. 1. to perfection - in every detail; "the new house suited them to a T" just right, to a T, to the letter ," he said. "In other words Adv. 1. in other words - otherwise stated; "in other words, we are broke" put differently , the risk is abundant." Clouds on horizon Foremost is the possibility that the U.S. trade and budget deficits will lead to interest rate hikes that would constrict con·strict v. To make smaller or narrower, especially by binding or squeezing. the flow of capital into the real estate market, Gabriel said. "The trade deficit is not a deficit; it's an abyss," he said. "It's a black hole at an unprecedented 6 percent of GDP GDP (guanosine diphosphate): see guanine. and our budget deficit isn't far behind." Should the confidence of foreign lenders become shaken
Shaken (車剣, also known as kurumaken) are a type of Shuriken , Gabriel said interest rates could rise dramatically. "There would be an upward adjustment in interest rates that would have a dramatic affect on real estate in different sectors," he said. Despite possible interest rate hikes and a fragile economic recovery, Stephen Cauley, a professor of real estate investment at UCLA's Anderson School Anderson School may refer to:
Los Angeles commercial real estate will continue to attract high prices, he explained, because of the number of large pension funds are looking to buy in the market. "Pension funds are looking for Looking for In the context of general equities, this describing a buy interest in which a dealer is asked to offer stock, often involving a capital commitment. Antithesis of in touch with. an alternative investment and real estate is increasingly looking good because the fundamentals are better," Cauley said. "It's incredibly costly to build new real estate in California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). so when the economy picks up they stand to gain." Gabriel said that a weakening weak·en tr. & intr.v. weak·ened, weak·en·ing, weak·ens To make or become weak or weaker. weak  en·er n. dollar--a byproduct by·prod·uct or by-prod·uct n. 1. Something produced in the making of something else. 2. A secondary result; a side effect. Noun 1. of the twin deficits--may cause foreign investors holding the euro or Japanese yen “Yen” redirects here. For the other use, see Yen (disambiguation). “JPY” redirects here. For the Australian singer with the same moniker, see John Paul Young. to enter the U.S. real estate market in 2005. The exchange rate gives Europeans, in particular, an ability to buy up properties at a lower cost than their U.S. competitors. Gabriel said the influx could potentially be on the scale of Japanese investment in L.A. real estate in the early 1990s. "It's something we are watching closely with some anticipation that there is going to be an increase, given the fluctuation Fluctuation A price or interest rate change. in exchange rates," he said. [GRAPHICS OMITTED]
LOS ANGELES COUNTY
Los Angeles County Office Market, Fourth Quarter 2004
Total Vacant Space
Market/Submarket Inventory (square ft.)
Downtown LA. 32,167,693 6,128,037
Wilshire Center 7,186,440 853,500
Miracle/Park Mile 5,855,479 832,318
Wilshire Combined 13,041,919 1,685,818
San Gabriel Valley 14,478,842 1,586,228
Burbank 4,530,131 584,212
Glendale 5,994,122 785,891
Pasadena 6,740,682 503,021
Tri-Cities 17,264,935 1,873,124
Hollywood/WeHo 3,725,092 448,695
Beverly Hills 5,931,532 824,956
Brentwood 3,455,134 429,820
Century City 9,286,188 1,593,021
Marine/CulverCity 5,815,816 917,083
Santa Monica 7,882,943 982,420
West Los Angeles 5,678,218 715,757
Westwood 3,002,875 631,087
West Los Angeles 41,052,706 6,094,144
North County 1,593,150 105,661
Central Valley 7,883,813 615,639
Conejo Valley * 6,926,176 597,946
East Valley 2,818,998 256,015
West Valley 7,820,267 793,456
San Fernando Valley 25,449,254 2,263,056
190th Street Corridor 3,125,723 688,712
Carson 1,173,071 131,550
El Segundo/Beach Cities 10,459,126 2,324,335
LAX/Century Blvd. 3,884,481 1,424,840
Long Beach Downtown 4,093,889 703,721
Long Beach Suburban 4,687,826 520,938
Torrance Central 3,307,808 545,294
South Bay 30,731,924 6,339,390
Los Angeles County 179,505,515 26,524,153
Vacancy Rate
Under
4th Qtr. 3rd Qtr. 4th Qtr. Construction
Market/Submarket 2004 2004 2003 (square ft.)
Downtown LA. 19.1% 19.4% 19.6% 0
Wilshire Center 11.9% 11.2% 12.4% 0
Miracle/Park Mile 14.2% 16.7% 15.7% 0
Wilshire Combined 12.9% 13.7% 13.9% 0
San Gabriel Valley 11.0% 11.7% 11.4% 0
Burbank 12.9% 13.8% 11.7% 89,293
Glendale 13.1% 13.2% 13.4% 0
Pasadena 7.5% 7.8% 11.0% 232,782
Tri-Cities 10.8% 11.3% 12.0% 322,075
Hollywood/WeHo 12.0% 11.5% 19.3% 0
Beverly Hills 13.9% 13.4% 12.6% 40,708
Brentwood 12.4% 12.8% 14.5% 0
Century City 17.2% 18.7% 18.5% 790,121
Marine/CulverCity 15.8% 14.0% 16.8% 0
Santa Monica 12.5% 13.9% 17.2% 91,500
West Los Angeles 12.6% 13.9% 16.9% 0
Westwood 21.0% 20.3% 24.0% 0
West Los Angeles 14.8% 15.3% 17.0% 922,329
North County 6.6% 9.2% 10.8% 42,760
Central Valley 7.8% 8.8% 10.5% 0
Conejo Valley * 8.6% 10.4% 13.1% 102,517
East Valley 9.1% 11.5% 14.1% 0
West Valley 10.1% 10.4% 14.6% 179,336
San Fernando Valley 8.9% 10.0% 13.0% 281,853
190th Street Corridor 22.0% 21.8% 16.9% 0
Carson 11.2% 12.2% 6.7% 0
El Segundo/Beach Cities 22.2% 23.1% 24.6% 0
LAX/Century Blvd. 36.7% 29.5% 29.9% 0
Long Beach Downtown 17.2% 12.6% 15.8% 0
Long Beach Suburban 11.1% 9.3% 10.0% 39,000
Torrance Central 16.5% 17.4% 18.0% 0
South Bay 20.6% 19.3% 19.7% 39,000
Los Angeles County 14.8% 15.0% 16.2% 1,608,017
Net Absorption (square ft.) (1)
4th Qtr. 3rd Qtr. 4th Qtr.
Market/Submarket 2004 2004 2003
Downtown LA. 99,949 39,997 105,753
Wilshire Center (45,602) 68,967 (12,855)
Miracle/Park Mile 147,891 1,454 46,698
Wilshire Combined 102,289 70,421 33,843
San Gabriel Valley 101,031 1,235 62,619
Burbank 41,226 43,925 19,608
Glendale 3,336 100,310 36,713
Pasadena 25,105 53,491 (46,621)
Tri-Cities 69,667 197,726 9,700
Hollywood/WeHo (19,500) 286,746 38,997
Beverly Hills (29,546) (88,811) 16,669
Brentwood 11,234 24,039 (139,985)
Century City 143,632 (97,627) (287,808)
Marine/CulverCity (100,041) 182,895 (161,923)
Santa Monica 112,446 193,852 (162,270)
West Los Angeles 75,375 121,402 (89,766)
Westwood (21,740) 61,793 (43,560)
West Los Angeles 191,360 397,543 (868,643)
North County 40,479 9,652 20,781
Central Valley 78,684 2,857 18,693
Conejo Valley * 97,642 (30,002) 43,161
East Valley 67,732 61,017 (68,688)
West Valley 17,909 5,156 181,771
San Fernando Valley 261,967 39,028 174,937
190th Street Corridor 46,938 (132,378) (205,739)
Carson 11,211 25,192 20,368
El Segundo/Beach Cities 170,477 167,336 130,538
LAX/Century Blvd. (279,701) 24,218 (65,617)
Long Beach Downtown (186,852) 43,529 36,566
Long Beach Suburban (82,790) 47,039 9,145
Torrance Central 31,754 (97,965) (19,302)
South Bay (288,963) 76,971 (94,041)
Los Angeles County 558,279 1,119,319 (516,054)
Class-A Asking Rent (2)
4th Qtr. 3rd Qtr. 4th Qtr.
Market/Submarket 2004 2004 2003
Downtown LA. $2.62 $2.63 $2.60
Wilshire Center $1.47 $1.41 $1.42
Miracle/Park Mile $2.26 $2.23 $2.10
Wilshire Combined $1.87 $1.82 $1.76
San Gabriel Valley $2.06 $1.94 $1.93
Burbank $2.60 $2.63 $2.53
Glendale $2.44 $2.41 $2.41
Pasadena $2.42 $2.41 $2.35
Tri-Cities $2.48 $2.47 $2.43
Hollywood/WeHo $2.45 $2.27 $2.35
Beverly Hills $2.79 $2.78 $2.94
Brentwood $2.50 $2.50 $2.63
Century City $3.07 $3.01 $3.18
Marine/CulverCity $2.25 $2.26 $2.39
Santa Monica $3.14 $3.04 $3.11
West Los Angeles $2.42 $2.40 $2.42
Westwood $2.79 $2.79 $2.84
West Los Angeles $2.71 $2.68 $2.79
North County $2.08 $2.04 $1.80
Central Valley $1.99 $2.03 $2.04
Conejo Valley * $2.17 $2.16 $2.20
East Valley $2.59 $2.55 $2.53
West Valley $2.18 $2.15 $2.18
San Fernando Valley $2.23 $2.22 $2.24
190th Street Corridor $2.09 $2.00 $2.11
Carson $1.88 $1.87 $1.89
El Segundo/Beach Cities $2.08 $2.13 $2.22
LAX/Century Blvd. $1.52 $1.52 $1.51
Long Beach Downtown $2.14 $2.14 $2.18
Long Beach Suburban $2.18 $2.15 $2.13
Torrance Central $2.11 $2.11 $2.02
South Bay $2.00 $2.01 $2.04
Los Angeles County $2.45 $2.42 $2.43
Los Angeles County Industrial Market, Fourth Quarter 2004
Total Vacant
Inventory Space
Market (square ft.) (square ft.)
Central L.A. 282,650,757 3,423,225
Mid Cities 112,775,471 5,148,546
North L.A. 165,075,639 6,410,428
San Gabriel Valley 169,724,374 2,083,200
South Bay 216,519,376 5,721,459
L.A. County Total 946,745,617 22,786,858
Vacancy Rate
Under
4th Qtr. 3rd Qtr. 4th Qtr. Construction
Market 2004 2004 2003 (square ft.)
Central L.A. 1.2% 1.6% 1.9% 664,253
Mid Cities 4.6% 4.0% 4.3% 1,238,716
North L.A. 3.9% 3.8% 4.8% 857,325
San Gabriel Valley 1.2% 1.5% 2.3% 2,576,635
South Bay 2.6% 2.7% 4.0% 1,882,411
L.A. County Total 2.4% 2.5% 3.2% 7,219,340
Sold & Leased (square ft.)
4th Qtr. 3rd Qtr. 4th Qtr.
Market 2004 2004 2003
Central L.A. 1,847,785 2,673,380 3,286,416
Mid Cities 1,957,733 1,881,754 1,450,396
North L.A. 1,715,664 1,996,983 1,077,043
San Gabriel Valley 1,661,593 2,250,473 1,841,751
South Bay 3,475,381 5,491,213 2,640,551
L.A. County Total 10,658,156 14,293,803 10,296,157
Asking Rent (3)
4th Qtr. 3rd Qtr. 4th Qtr.
Market 2004 2004 2003
Central L.A. $0.44 $0.44 $0.44
Mid Cities $0.51 $0.50 $0.50
North L.A. $0.62 $0.62 $0.62
San Gabriel Valley $0.48 $0.48 $0.43
South Bay $0.54 $0.53 $0.49
L.A. County Total 3,505,009 $0.51 $0.50
* Includes parts of Ventura Co.
(1) Net Absorption is the change in occupied space for a given
period of time, excluding sublet space and renewals.
(2) Average monthly, per-square-foot rents.
(3) Average monthly, triple-net rents.
Due to the transfer of owner/occupied space to competitively
leasable space and/or the delivery of new construction in the
market, discrepancies may occur in the relation between vacancy
rates and net absorption.
Source: Grubb a Ellis Co.
|
|
||||||||||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion