by Brianna Crandall — February 13, 2013—Facilities owners and managers in the “City of Angels” or connected to it in some way may be interested to hear that growth in the Los Angeles commercial real estate (CRE) market in 2013 is expected to be characterized by a variable recovery, with hotels and multifamily residences leading the way, according Jones Lang LaSalle, a global financial and professional services firm specializing in real estate, at the firm’s annual Los Angeles Forecast event.
The Los Angeles Property Forecast 2013 predicts that the city’s office sector is likely to continue its recovery, facilitated by growth in the entertainment/media and technology sectors. The industrial market will continue to flourish, with e-commerce making a significant impact on the market in 2013.
“With the presidential election and fiscal cliff issues behind us, the Los Angeles commercial real estate market will see some continued improvement in 2013, with tenants and investors having a more focused business plan,” said Peter Belisle, Jones Lang LaSalle’s Southwest Region Market Director. “With increased economic stability, we expect that Los Angeles will add approximately 80,000 jobs in 2013, with the unemployment rate declining from 11.2 percent to 9.7 percent.”
JLL’s property type forecast summary:
Office: The Los Angeles office market is expected to continue on the path of recovery in 2013. As employment conditions improve, space demand will follow. Based on current requirements, JLL expects tenants to absorb two million square feet of office space in 2013, pulling vacancy down one percent from 18.2 percent.
Retail: Trendy grocery-anchored centers and centers with a merchandise mix of good restaurants, entertainment, and convenience will be the leaders in Los Angeles in 2013. Discount and up-scale grocers will continue competing for market share with traditional grocers in 2013. For 2013, the focus of multitenant investors will be on centers in better locations with strong anchor tenants. To remain competitive with alternative channels, many big-box retailers are adjusting their business models and physical footprints.
Industrial: Tenant demand for new Class A warehouses in excess of 300,000 square feet is rampant, and will give rise to new construction in the Inland Empire, which is expected to have 11 million square feet underway by the end of 2013. In Los Angeles, more than 2 million square feet of in-fill product will be in development in 2013. Demand for high-cube warehouses will elevate absorption numbers and apply upward pressure on rents.
Multifamily: Economic headwinds have had a positive effect on the multifamily sector, propelling apartment fundamentals forward in Los Angeles with consistent gains since mid-2009. Currently, the average occupancy rate for the region stands at 94.4 percent, and continued strong performance through 2013 is expected.
Hotels: Los Angeles ranks in the top 10 markets in terms of revenue per available room, and JLL expects this positioning to continue. Transaction volume in the Los Angeles market totaled nearly $400 million in 2012, and JLL expects this heady pace to continue in 2013. Sought-after hotel assets will include branded, high-quality hotels in urban areas proximate to multiple demand generators.
