Southern California Market

Within southern California are two major cities, Los Angeles and San Diego, as well as three of the country's largest metropolitan areas.

With a population of 3,792,621, Los Angeles is the most populous city in California and the second most populous in the United States. To the south and with a population of 1,307,402 is San Diego, the second most populous city in the state and the eighth most populous in the nation. Its counties of Los Angeles, Orange, San Diego, San Bernardino, and Riverside are in the top 15 most populous counties in the United States and all five are the top 5 most populous counties in California.

The region is also home to Los Angeles International Airport, the second-busiest airport in the United States by passenger volume and the third by international passenger volume; San Diego International Airport the busiest single runway airport in the world; Van Nuys Airport, the world's busiest general aviation airport; major commercial airports at Orange County, Ontario, Burbank and Long Beach; and numerous smaller commercial and general aviation airports. Southern California is also home to the Port of Los Angeles, the United States' busiest commercial port; the adjacent Port of Long Beach, the United States' second busiest container port; and the Port of San Diego.

Also of note in the region is the freeway system, which is the world's busiest. Six of the seven lines of the commuter rail system, Metrolink, run out of Downtown Los Angeles, connecting Los Angeles, Ventura, San Bernardino, Riverside, Orange, and San Diego counties with the other line connecting San Bernardino, Riverside, and Orange counties directly.

The Tech Coast is a moniker that has gained use as a descriptor for the region's diversified technology and industrial base as well as its multitude of prestigious and world-renowned research universities and other public and private institutions.

Among these include 5 University of California campuses (Irvine, Los Angeles, Riverside, Santa Barbara, and San Diego); 12 California State University campuses (Bakersfield, Channel Islands, Dominguez Hills, Fullerton, Los Angeles, Long Beach, Northridge, Pomona, San Bernardino, San Diego, San Marcos, and San Luis Obispo); and private institutions such as the California Institute of Technology, Chapman University, the Claremont Colleges (Claremont McKenna College, Harvey Mudd College, Pitzer College, Pomona College, and Scripps College), Loma Linda University, Loyola Marymount University, Occidental College, Pepperdine University, University of San Diego, and the University of Southern California. Universal Studios at Hollywood Southern California is also the entertainment (motion picture, television, and recorded music) capital of the world and is home to Hollywood, a district in Los Angeles and a name associated with the motion picture industry.

Headquartered in southern California are The Walt Disney Company (which also owns ABC), Sony Pictures, Universal, MGM, Paramount Pictures, 20th Century Fox, and Warner Brothers.

Besides the entertainment industry, southern California is also home to a large home grown surf and skateboard culture. Companies such as Volcom, Quiksilver, No Fear, RVCA, and Body Glove are all headquartered in southern California. Professional skateboarder Tony Hawk, professional surfers Rob Machado, Tim Curran, Bobby Martinez, Pat O'Connell, Dane Reynolds, and Chris Ward, and professional snowboarder Shaun White live in southern California. Some of the world's legendary surf spots are in southern California as well, including Trestles, Rincon, The Wedge, Huntington Beach, and Malibu, and it is second only to the island of Oahu in terms of famous surf breaks. Some of the world's biggest extreme sports events, including the X Games,Boost Mobile Pro, and the U.S. Open of Surfing are all in southern California. Southern California is also important to the world of yachting. The annual Transpacific Yacht Race, or "Transpac", from Los Angeles to Hawaii, is one of yachting's premier events. The San Diego Yacht Club held the America's Cup, the most prestigious prize in yachting, from 1988 to 1995 and hosted three America's Cup races during that time.

Southern California is home to many sports franchises and sports networks such as Fox Sports Net. Professional teams that are located in the region include the Los Angeles Lakers, Los Angeles Clippers, Los Angeles Dodgers, Los Angeles Angels of Anaheim, San Diego Padres, Los Angeles Kings, Anaheim Ducks, Los Angeles Galaxy, Chivas USA, and San Diego Chargers. Southern California also is home to a number of popular NCAA sports programs such as the UCLA Bruins, the USC Trojans, and the San Diego State Aztecs. Southern California is culturally diverse and well known worldwide. Many tourists frequent the southern California coast for its popular beaches and the eastern desert for its dramatic open spaces.

 

Current Market Trends & News

February 14, 2014 - Real estate, once focused on buying properties that will quickly resell for a profit or buying them for the sake of amassing large portfolios, now has a new focus in order to be successful: NOI growth and adding value to assets.

Speakers at yesterday’s ULI Orange County/Inland Empire capital-markets event, “The Money Chase” described how the environment for acquisition and yield is changing.

“It’s going to be all about revenue, not cap-rate compression, when buying properties going forward,” one real estate expert said. “Growth is the most important portion. You don’t want to buy when cap rates are high, but when NOI growth is possible.”

He added that capital is being raised for value-add opportunities and growth markets. “The environment’s changed.” He also predicted that industrial will be the top performer among the four food groups in commercial real estate this year, with multifamily being in a different phase of the cycle than the other sectors.

 

February 11, 2014 - The higher pricing of single-family homes in the Southern California market creates an affordability factor in the multifamily market.

One industry expert reported in GlobeSt.com said: "We’re in a really dynamic market right now, where both apartments and condos can be strong at the same time. In Beverly Hills, we’re seeing the rental of apartments for $4 to $5 per square foot, and we have a number of projects throughout L.A. that are selling or will have strong sales." GlobeSt.com: There’s a lot of multifamily being built and has been built for the last five or six years."

 

February 5, 2014 - CRE Industry Faces Dramatic Changes in Multifamily Supply, Financing Environment. According to CoStar, the U.S. apartment market continued to see robust growth in 2013, but investors are keeping a wary eye on looming changes going into 2014, including the impact from rising supply, rising interest rates and the prospects of restructuring the nation’s two biggest government-sponsored enterprises (GSE’s) Fannie Mae and Freddie Mac. 

For the top 54 U.S. metros, CoStar Group forecasts more than 240,000 new multifamily units will be added in 2014, and a combined nearly 350,000 units in 2015 and 2016. Those projections are on top of the more than 200,000 new apartment units developers added between 2012 and 2013. 

The supply wave already is affecting some market indicators, including gradual reductions in rental growth and increases in vacancy, according Luis Mejia, CoStar’s director of U.S. research, multifamily. The aggregate fourth quarter 2013 CoStar data for 50-unit-plus properties shows a year-over-year effective rent growth pattern that is consistent with increasing competition. As landlords adjusted concessions to lure renters, annual effective rent growth declined from 4.9% in the first quarter to 2.7% in last quarter of 2013, after peaking above 7% in 2012. 

 

 

February 5, 2014 - CRE Industry Faces Dramatic Changes in Multifamily Supply, Financing Environment. According to CoStar, The U.S. apartment market continued to see robust growth in 2013, but investors are keeping a wary eye on looming changes going into 2014, including the impact from rising supply, rising interest rates and the prospects of restructuring the nation’s two biggest government-sponsored enterprises (GSE’s) Fannie Mae and Freddie Mac. 
 
For the top 54 U.S. metros, CoStar Group forecasts more than 240,000 new multifamily units will be added in 2014, and a combined nearly 350,000 units in 2015 and 2016. Those projections are on top of the more than 200,000 new apartment units developers added between 2012 and 2013. 
 
The supply wave already is affecting some market indicators, including gradual reductions in rental growth and increases in vacancy, according Luis Mejia, CoStar’s director of U.S. research, multifamily. The aggregate fourth quarter 2013 CoStar data for 50-unit-plus properties shows a year-over-year effective rent growth pattern that is consistent with increasing competition. As landlords adjusted concessions to lure renters, annual effective rent growth declined from 4.9% in the first quarter to 2.7% in last quarter of 2013, after peaking above 7% in 2012.