Across sectors, the outlook is good for commercial real estate, though some cities and sectors are stronger than others. Some of the industry’s power players recently shared their perspectives about the market.
It is nice to see that industrial, which has often taken a back seat to other sectors, is becoming the belle of the ball, CBRE Vice Chairman Darla Longo said.
E-commerce has made a big impact.
Longo is not predicting any type of major downturn for the industrial sector because of the convergence of e-commerce with industrial distribution, she said at last week’s Allen Matkins View From The Top Event in Los Angeles.
She predicts it could take five to seven years to find the new normal.
“As e-commerce emerges, we need more space, larger spaces and the last mile, so it’s kind of hitting us from all directions from a capital markets perspective,” she said.
LBA Realty is active in industrial. Principal David Thomas said LBA Realty spends a fair amount of resources and effort working directly with corporate America.
The company recently completed a deal with a large retailer that is downsizing its supply chain, and Thomas said the firm continues to look for those types of opportunities.
Industrial is not the only sector that is strong. Office continues to perform well, particularly in specific markets.
Newmark Knight Frank President of West Coast Capital Markets Kevin Shannon said Seattle is going to continue to lead the office market and Culver City and Hollywood are among the hottest locations for office in Southern California. San Francisco, while popular, has a lack of product, he said.
He said debt is driving the market now across all real estate classes.
Santa Monica is a city that has its challenges when it comes to development, according to Worthe Real Estate Group President Jeff Worthe.
“We have three entitlement projects in Santa Monica, which is really almost suicidal,” Worthe said.
He said if the company can get them entitled, it will be gold. The properties are smaller sites, including a two-acre and a five-acre site.
“That community is very organized, very committed to trying to stop folks like us,”
Worthe said of Santa Monica. Worthe said it is also becoming more difficult for the firm to build office buildings where it wants.
Kilroy Realty Corp. CEO John Kilroy said he is seeing more demand for office campuses, with the main focus on what companies need in terms of location and amenities to attract and retain employees.
“I’ve never had more fun or been more excited or been more enthused than I am now,” he said.