Los Angeles is ranked as the number one city for many things including college research, diversity, electric vehicles, and now commercial real estate. According to L.A. Biz, CBRE Group surveyed up to 300 real estate investors to rank commercial real estate markets by their overall desirability.
Los Angeles was ranked not only as the most attractive CRE market in the U.S. but also the most attractive market in the West. Dallas, TX came in at a close second with New York City and Seattle tying for third place.
“A prolonged period of U.S. economic growth, as well as tax cuts and favorable regulatory changes, are contributing to positive investor sentiment on real estate,” said the authors in the CBRE report.
Los Angeles is expected to see a significant jump in interest rates this year. According to Realtor.com, listing prices have increased as much as 10% over the past year.
However, the city remains a favorite among 96% of investors. In fact, approximately 45% of real estate investors plan to increase the number acquisitions in L.A. compared to 2017.
Perhaps these statistics aren’t so surprising considering the number of billionaires living in California.
Compared to areas like the District of Columbia, which has more homeless citizens than any other state, and South Carolina, which is renowned for having up to 62% more fatal car accidents than the national average, more billionaires live in the state of California than any other area in the world.
Those who choose to invest in triple net lease investment offerings need an income of $200,000 or higher or, at least, a net worth of $1 million. In Los Angeles alone, there are as many as 131 individuals worth $1 billion or more out of 1,826 billionaires in the world.
Needless to say, the expectations for ROI in the U.S. are strong. Up to 58% of real estate investors predict an ROI between 6% to 9% whereas 19% of investors believe the ROI will be even higher.
However, the head of research at CBRE, Spencer Levy, warns those investing in Los Angeles to remain agile. Many other real estate markets such as those in Atlanta, Denver, and Portland have also been on the move. Long-term paper, Levy says, needs to be considered and not just the initial investment.
Still, Los Angeles remains a powerful investment choice in the current commercial market.
“Any truly national player in real estate must pay attention to Los Angeles,” said Max Gross, the Editor in Chief of Commercial Observer. “What’s going on there, who the important people are, what the trends are, and who’s doing what.”