Boston, LA office landlords to benefit from “flight to quality” amid economic slowdown

Secondary cities like Austin more susceptible in downturn

Boston and L.A. skylines (Credit: Wikipedia)
Boston and L.A. skylines (Credit: Wikipedia)

As the U.S. economy slows, cities with more diversified economic bases stand to gain as investors move away from riskier bets.

Such cities include Los Angeles, which is seeing a tech and media boom, and Boston, where a strong biotechnology sector is supporting the city’s traditional financial-services base, Bloomberg reported.

“The focus should be on quality of market and quality of real estate,” JPMorgan Asset Management co-portfolio manager of real estate Ann Cole told Bloomberg. “As you get later in the cycle, that’s not the time to be taking additional risk.”

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Secondary cities like Austin, Texas may offer higher yields, but they are often more susceptible in a downturn due to reliance on one industry or one company.

Economic growth in the U.S. is expected to slow down over the next few years, hitting a low of 1.8 percent in 2021 according to Bloomberg data, and this will correlate strongly with office-building performance.

“In every recessionary environment, there’s always a flight to quality,” Cole said. [Bloomberg] — Kevin Sun