California leads all U.S. states in commercial deals
Author: Administrator
Category: Commercial Real Estate
California, anchored by two coastal cities with rising employment and rents, attracted almost $49 billion in commercial property investment in the first half of the year, more than any other state.
The most populous U.S. state had 29 percent more office, retail, hotel and industrial real estate sales by dollar amount than New York state and triple that of third-place Texas. California’s total investment was up 48 percent from a year earlier, research firm Real Capital Analytics reported. It trailed New York only in apartment sales.
California’s property market was buoyed by growth in the Internet industry in the north, international trade in the south and professional services statewide, said Steve Levy, director of the Palo Alto-based Center for Continuing Study of the California Economy.
“We’ve had a really strong economy, and companies haven’t moved the job base outside of the cities,” Levy said. “Even the biotech industry, with all the added cost, is going into San Francisco. People want to work in the big metro areas.”
California’s top transactions in the first half involved buildings owned by Equity Office Properties Trust, which was purchased by New York-based Blackstone Group in February for $39 billion including debt, the biggest leveraged buyout to that time.
Within weeks, Blackstone sold Equity Office properties in San Francisco to Morgan Stanley and in Los Angeles to Maguire Properties, making the three deals worth $11.8 billion, New York-based Real Capital said.
“The California economy is diverse and strong, you have a quality labor force and supply constraints, and it’s tough to build,” said Chief Executive Joaquin de Monet of Arden Realty, a unit of Fairfield, Conn.-based General Electric, which bought 20 office properties in San Diego and Orange County in June from Blackstone for $970 million. “And if you need to sell, there is generally a buyer.”
While the current credit crunch means highly leveraged transactions of the size of the Blackstone deal probably could not happen today, California is still attractive to buyers with sufficient cash, said Marc Sznajderman, managing director at Carlton Advisory Services, a New York-based real estate investment bank.
“Now it’s a market that will benefit buyers who are well capitalized, guys who can put in 25 percent cash or higher,” he said. Arden’s purchase was all-cash, de Monet said.
Health Care Property Investors, in Long Beach, acquired 83 life science buildings in San Francisco and San Diego in June for $2 billion in the fourth-largest sale. Chicago-based Walton Street Capital bought warehouses near ports in Los Angeles and Oakland in April for $1.7 billion in the fifth-largest.
“There’s innovation on the high end and good infrastructure for everyone,” said Chief Executive Officer Hamid Moghadam of San Francisco-based AMB Property, the second-largest industrial real estate investment trust. AMB bought six California buildings in February, March, April and June for a combined $238 million.
Commercial rents increased in Los Angeles, San Francisco and Silicon Valley as California added 51,600 non-farm jobs in the first six months of the year and more than 500,000 in the past two years through June, according to the state’s Employment Development Department.
Hiring at technology firms including San Jose-based Cisco Systems, the biggest maker of computer-networking equipment, and Mountain View-based Google, the most popular Internet search engine, helped drive up Silicon Valley office rents 14 percent in the second quarter from a year ago, Santa Clara-based commercial brokerage Cornish & Carey said.
Record U.S. imports pushed down the vacancy rate for distribution space in central Los Angeles to 2.2 percent in the second quarter, the lowest in eight years, according to New York-based commercial brokerage Cushman & Wakefield. The ports of Los Angeles and Long Beach comprise the largest cargo complex in the nation.
“Money is flying to where people live, and millions of people are coming to California,” said Victor MacFarlane, chairman and chief executive of San Francisco-based MacFarlane Partners, which invested $200 million in the first half, including $134 million in a 54-story hotel and condominium tower at the L.A. Live project in downtown Los Angeles.
Source:
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