The position for the Los Angeles real estate retail market remains strong, although the slowdown in the economic future and suspicious for housing conditions will reduce the demand for commercial space in the short term. Due to the limited supply of land, there will be more redevelopment and rehabilitation of older shopping centers. Conversion to an outdoor mall, additions, such as novelties and entertainment complexes. Some local employers continue to cut their payroll and uncertainty has been installed and created a mental freeze for most buyers. The forecast for the vacancy is higher and lease concessions will be a motivating factor in maintaining or attracting tenants. In addition, it will focus on the quality of the tenant and the mix of tenants within the multi-client shopping centers to generate better pedestrian traffic and increase sales per square foot.
The speed of sales will moderate as pressure continues as banks intend to prolong their thigh lending policies. As a result, buyers in general will demand higher capitalization rates, type A and single tenant properties will be in the range of 6-6.5%, and lower quality properties have to offer higher initial yields between 50 and 100 basic points to attract qualified buyers. That said, the key to a successful investment in commercial properties may still be to locate those assets in certain markets that will rise above completion by having desirable investment elements, such as excellent visibility, increased car and pedestrian traffic, high population density. All these elements not only increase the marketability of the property itself. In addition, these characteristics will lend themselves to better local trends that will lead to a fundamental analysis of the ownership of banks for financing.
Economy: employment forecasts remain weak for 2009, the start of new construction will be moderate, vacancy rates will increase slightly and rents will remain under control due to the decrease in tenant demand and a slow escalation could be expected of new and existing rentals. Sales trends and the speed of commercial properties will remain modest, as the expectations of sellers and buyers still do not match and are not yet realistic. The local economic recession has raised capitalization rates and investor confidence must be recovered as an alternative for smart money to increase demand and create an upward trend in prices.
The properties of a single tenant due to its higher quality have had better results (6% limit) than the properties of its Muti-Tenant counterpart (6.5-7%) due to the safety and quality of the tenants.
The Los Angeles downtown market has slowed, some of the development projects have been suspended or canceled altogether due to the lack of available funding and the vacancy has increased. The completion of the LA Live project and the renewed businesses of the LA Convention Center will create new interests and businesses within the area.
The west side market due to the entry barrier, the high cost of new development and the lack of available inventory for sale has resulted in a stable market, but rents have stagnated and the average sale price has fallen slightly.
The San Fernando Valley market remained more active in comparison, but the slower rate of new developments and absorption affected prices.
The Long Beach and South Bay market expects to have a slowdown in retail property sales with less stagnant rental growth.
The Los Angeles market area due to its migration patterns, lack of landfill supply, demography and high population density, its climate and its considerable diverse economy remain on the watchlist of the main RIETs, as well as small and medium real estate investors looking for security and alternative investment. to the stock and bond market. Buyers demand higher capitalization rates, especially in the properties of non-national tenants. Lenders must be cautious in 2009, with lower securities lending values (LTV) and demand debt coverage rates (DCR) of 1.25 or more.