Only one thing is certain about the commercial real estate market in Southern California: it is constantly in flux. Los Angeles has had many peaks and valleys since its days as a mission village in the 1800s, with its economic health dependent on everything from cattle prices to the aerospace industry. Just a few years ago, the news was full of bits about the real estate collapse in California, but where is it now?
Just in the last year, the commercial real estate market in the Los Angeles area has shown signs of a definite upswing. LA’s Westside, which has been dubbed “Silicone Beach,” has attracted behemoths such as Amazon, Facebook, and Google. In El Segundo, an area that hasn’t seen any development in five years, Continental Development Corporation, which has developed and manages more than four million square feet of commercial real estate in the LA area, is building a trendy new commercial complex that they hope will appeal to the technology and entertainment companies that seem to shun traditional high-rises. Just this week, GlobeSt.com published a positive prediction for the Conejo and Ventura Valleys: more retail development, lower office vacancy rates, and better industrial sale values. The Los Angeles Office market showed slight improvement in vacancy rates in the fourth quarter 2013, posting 12.3%, compared to the national average of 11.5%.
The Associated General Contractors of America released end-of-year rankings for 2013 that showed the Los-Angeles-Long Beach-Glandale area added more construction jobs than any other area in the country except Atlanta. The Santa Ana-Anaheim-Irvine area added almost as many jobs. These numbers don’t differentiate between commercial and residential development, but it is still a very positive outlook for the real estate development market in general.
While many factors contribute to commercial growth, including the overall economic health of the country, the ability of companies to obtain funding, and the stability of the various industries, one factor that may be helping the commercial market in Los Angeles is the Gross Receipts Tax Exemption that went into effect in 2010, but was recently extended to 2015. This Act exempts companies from municipal business taxes if they create jobs in LA. Mayor Villaraigosa claims the Act drew more than 1200 new companies grossing $500,000 and above in 2012 alone.
Incentives such as this and other innovative ideas could certainly help lower the office vacancy rates, raise rents, and create a demand for more commercial space. With the number of companies relocating to the area and the start-up companies sprouting up every day, the upswing in the market could (should) continue for quite some time.
(More Articles: Mike Meisenbach)