Attractive Investment Opportunities in the L.A. Industrial Market
Institutional investors and REITs have significantly increased their presence in the L.A. market, drawn by robust historical rent growth and high barriers to entry. Over the past three years, they have driven 40% of acquisition volume, up from 30% in the past decade. In contrast, user acquisitions have fallen to 11% of sales volume from 16%, while private investors and private equity funds have also lost some market share, now accounting for just under 50% of buyer volume.
Shifts in Market Dynamics
Private owners and users have been divesting over the past decade, while institutional investors and REITs have expanded their ownership in the market. Elevated capital costs, softer market fundamentals, and the recently enacted ULA transfer tax on deals exceeding $5 million led to a 40% decline in sales volume in 2023, dropping to $5.3 billion from a record $9.3 billion in 2022. Sales volume in 2024 is on a similar, if not weaker, trajectory, with $3.1 billion traded in the first three quarters.
Valuations and Cap Rates
Valuations remain under pressure as market rents decline, but higher cap rates have had a more substantial impact on pricing. Cap rates have expanded by about 150 basis points, now ranging from the mid-5% to low 6%. The median price for logistics (warehouse and distribution) buildings traded in institutional-sized transactions over $10 million averaged around $330 per square foot in 2024, up slightly from 2023 but still down over 10% from 2022.
Unlock the Potential with The Ponce Real Estate Group
Navigating these market dynamics requires expertise and insight. The Ponce Real Estate Group is here to help you seize opportunities in the evolving L.A. market. Whether you're considering selling or looking to invest in high-potential properties, we have the knowledge and experience to guide you.
Contact us for a no-obligation evaluation of your property. Discover its potential value and explore your options for maximizing returns.
Reach out to us today:
· Frank: (310) 503-4158
· Viktorie: (424) 301-0075
Your real estate journey starts here. Let us help you make informed decisions and capitalize on opportunities in the dynamic Los Angeles market.
