Commercial Real Estate Values in Los Angeles
Based upon general trends, cap rates for commercial properties have been steadily increasing for Los Angeles County since 2008 at apx. 12.5 to 25.0 basis points a quarter.
In 2009, for most asset classes and property types, current cap rates for retail, office and industrial are in the 7% range and mulifamily apartments, are just below this.
In general, select, stable submarkets throughout Southern California, specifically, Los Angeles County are Hollywood, Silver Lake, Mid Wilshire / Koreatown which remain fairly strong regarding rental rates, vacancies and cap rates relative to surrounding areas of East Hollywood and Downtown Los Angeles where there are pockets of much older functionally obsolete buildings with lesser demographics.
Lenders, brokers and commercial real estate appraisers are having difficulty underwriting due to drops in rental rates, increased vacancies and rise in cap rates related to lack of recent lease and sale comparables.
As a Commercial Real Estate Consultant performing Market Rent/ Sale Studies, Appraisal, Valuation and Consulting, hope this insight is valuable.
Comments (2)
Didn't know residential was expected to drop another 20% in Los Angeles this year as I focus on commercial real estate only, heard SFR REO's should continue until 3rd/ 4th Quarter. When did residential (1-4 units) values start to drop apx. January 2007, even before subprime hit in June 2007? In general, how many % have values dropped for residential since then? In the 1990's, I saw values for everything drop 40-60% as a prior commercial real estate appraiser, the last downturn was for 5 years. There's a lag between commercial vs. residential, at this point, I see a conservative drop of 5 - 10 % for commercial in LA as there are few or little REO foreclosures yet. As a consultant/ broker, for seller's, I've been highly recommending selling since 3rd quarter 2008. Seller's who don't want to loose equity in the next 2-5 years and then regain to status quo in the future, now is the best time to sell before a substantial correction ahead. From 1995 to 2005, we've had an very good up trend, from 2005 to 2007, values doubled, this is 12 years of up, most cycles are 5 years.
Tony Kim, over 16 years ago
With residential real estate in LA expected to drop an additional 20% or so this year, how do you see the commercial market performing? Will it follow suit?
Joshua Dorkin, over 16 years ago