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Industry Pros Still Bullish on West Coast Real Estate

But End of the Economic Upswing Could Be Coming, Experts Say
September 19, 2018
Kevin Shannon, co-head of U.S. Capital Markets for Newmark Knight Frank; Stephen Rosetta, executive vice president and chief investment officer at Kilroy Realty Corp.; and Steve Briggs, principal and chief investment officer at LBA Realty, at the Allen Matkins' "View from the Top" event.
Credit: Karen Jordan for CoStar Group Inc.

The West Coast commercial real estate market is faring well, and the good news does not appear to be ending very soon, according to some of Los Angeles’ top commercial real estate experts.

Local brokers and executives agreed the Pacific Coast could be on a path to unprecedented years of economic growth, thanks in large part to investors who have money to burn and think the West Coast offers plenty of upside. The growth follows an historic economic downturn only a decade ago, and experts say the market's current high will eventually be met by another – less dramatic – low.

"Our West Coast markets have never been stronger," Stephen Rosetta, executive vice president and chief investment officer at Kilroy Realty Corp., told the crowd of around 600 people at a panel at Monday’s annual "View from the Top" event, sponsored by Century City, California-based law firm Allen Matkins.

The numbers seem to bear it out. Record sales and rental prices are making headlines up and down the coast while well-heeled domestic and foreign institutional investors invest more into the market.

Kevin Shannon, president and co-head of U.S. Capital Markets for Newmark Knight Frank, agreed. While we’re closer to the end of the cycle than the beginning, "it still feels so good out there," he said.

"The fundamentals are great," Shannon added. "There is a wall of capital out there both on the debt and equity side. So everything’s clearing."

He noted that 10 years ago, pension fund advisors were only allocating about 5 percent of their funds to real estate. "Now they’re closer to 14 percent. That trend is going to continue, so you’re going to still get more and more money going into real estate," Shannon said.

Of course, the growth can’t last forever. He used the baseball analogy, saying he sees the current state of the market as being in the seventh inning.

Scott Stafford, co-founder and principal at Strada Investment Group, said he also thinks the cycle is closer to the end than the beginning.

Even so, Jonathan Lange, vice president of Boston Properties, said, in recent years, many appear to still be "cautiously optimistic."

If there is a downturn, Shannon does not expect it to be as "dramatic" as it was a decade ago.

"When the game ends, it will be a short spring training, and we’ll be back playing ball again," Shannon added.

For now, the West Coast especially appears poised to continue to perform well, in his estimation.

"If you look at the engines of real estate on the West Coast: If you build it, they will come," he said.

As long as things continue to go well, Shannon said he thinks next June would mark the longest recovery in history.

This year marks the 11th annual event held by the law firm, which specializes in real estate, litigation, labor, tax, and business law.

Karen Jordan, Los Angeles Market Reporter  CoStar Group   
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