The Real Deal Los Angeles

LA is top target for US real estate investors in 2019: report

Nationwide, industrial and logistics are most preferred property types; multifamily is close No. 2
By Gregory Cornfield | March 07, 2019 03:00PM

Los Angeles has been the top target for commercial real estate investment in the country since 2016 (Credit: Wikipedia and iStock)

Despite signs of a slowing housing market and other warning lights in the real estate market, Los Angeles remains the top target for commercial investment among metro areas.

That’s according to CBRE’s newly-released Investor Intentions Survey. The L.A. region has been the top-ranked target investment area since 2016, according to the report.

Nationwide, there are signs that expected returns will drop, but the survey showed investors will remain active, with 98 percent of respondents saying they intend to make acquisitions this year.

Still, there has been a pronounced shift toward greater caution, with investors who are saying they will maintain or increase spending down 13 percent from 2018, according to the report.

Pricing is at or near the previous peaks for most asset types in prime locations, so investors are seeking yield in secondary markets and alternative asset types.

Although Southern California maintained the top rank for property purchases — and Dallas was second — an increasing number of investors are shifting their attention to smaller markets like Denver or Las Vegas.

Real estate debt remains the most common of the niche sectors at 52 percent. Self-storage, seniors housing and student housing were the next most popular — each favored by nearly 30 percent of investors.

Meanwhile, industrial and logistics are still the preferred property types, cited by 39 percent of investors as the most attractive going into 2019. The Inland Empire leads the nation in major warehouse leases, according to a recent report.

Multifamily closely followed, with 37 percent of investors naming it as the next most attractive property type, up from 20 percent in 2018. In Southern California specifically, “multifamily continues to be a sought-after category, given the area’s population growth and shortage in housing,” said Natalie Dahl of CBRE capital market business. Office was third, cited by 10 percent of investors.