CEO George Pino presents his outlook for the Los Angeles / Westside market for the first quarter (Q1) of 2017.
Hi, this is George Pino. I'm the CEO of Commercial Brokers International. I wanted to talk to you a little bit today about what I see forecasted in the first quarter of this year. I promise not to really talk about politics, but I am going to touch a little bit on the election -- and -- but also the Chinese investment, about what we're seeing in the multifamily housing market and office rents.
After the elections, the markets in general were pretty bullish with the new president... Trump being elected. I see this continuing after the inauguration of last week and will continue to this year, with very bullish investment behavior with the real estate markets.
I believe that the initial interest rate increases are going to affect the investment community in a positive manner. I see this as getting people off the table that were, perhaps, waiting for the bottom of the interest rates -- and they're actually starting to see them rise and the expectation of actually rising over another 100 basis points over the next year -- having them really come off and start looking for investments right now and taking advantage of still historically low interest rates.
We've already seen a little bit of a decrease in interest from foreign investors, especially in the Asian communities and China included. I see that probably more stabilizing a little but moreso, but really not at its peak levels that we've had in the past few years.
The Santa Monica multifamily market is a very interesting segment. People are a very bullish on it. There's been a recent article where Santa Monica has the highest rents in the nation. So, of course, that's bringing in some investor interest across the board. However, coupled with lower sales volume, as far as number of transactions over the past few years -- I think that we're actually seeing a little bit more of a stabilization. With that and the increase of interest rates that we're expecting, I don't anticipate any major changes, but at the same time, I don't see that the markets are going to be going up substantially in the near future.
The Westside has always been in demand for tech companies over the last few years and I don't see that changing. What I do see changing, however, is that they are expanding their areas where, historically, it started off in the Venice submarket, expanding into Santa Monica, really now pushing into Playa Del Rey and Culver City. You see a lot of developers right now really setting the pace and getting ready for the Culver City market to really take off and I see that actually happening, especially with the new Google campus adjacent to them right there in Playa Vista, off Jefferson [Blvd.].
Westside office rents should remain strong over the first quarter of 2017, there's still pretty high demand here, although we have seen some of the highest rent growth for office rates within the area, with office rents about $5.38 per square foot, for Class A office space, full service gross, which is about 20-25% higher than other popular submarkets, such as Playa Del Rey or Hollywood.