Commercial property trends in Los Angeles

Here is a very inspiring video from Allen Matkins relating to Los Angeles Real Estate Markets. They have also released some data relating to California construction. I think there are some opportunities and some risks currently in the Los Angeles market.

The short term opportunities are the downtown revitalization for property owners in this area. I have walked the streets and the change in appearance is palpable, (although I can still read the words “hourly rates” on some of the older hotels. But hey, they are making steps in the right direction. It’s a great opportunity for owners agents such as designers, contractors and real estate pro’s.

The long term I’m not completely sold on, and of course I have to offer some contention for the sake of balance. Los Angeles has a few tough issues. If I were holding real estate or serving customers in Los Angeles county exclusively I would be proactive in diversifying my reliance on the area for a few reasons. Los Angeles is tied with Detroit for population migration according to bloomberg. But there are large inflows of immigrants as EM economies have pushed hot money investments in local real estate. As we have seen previously with Japan, a foreign deflationary situation can reverse this trend sometimes very quickly. The unemployment rate is going down but its not low by any means. There is also the rising cost of pensions and city expenses billions are unfunded and are guaranteed by taxpayers. The cities international status and geography in relation to trade is a very big plus so for the time being everything is looking very rosy.

I think Los Angeles is in a period of recovery but the voting base continues to push less qualified candidates(In my humble opinion) into office and this trend will likely continue. I would consider diversifying my project between another nearby county to help reduce exposure to bad politics and the associated taxes that inevitably follow.




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