Despite Southern California’s office market activity suffering over the past year, there is growing demand from investors that indicates a promising future for the industry.
“We do have some headwinds, including housing costs, high taxes and long commute times; however, Southern California has a resilient economy with a diversity of industries to counter balance those that are in recession,” said Michael P. Zietsman, principal at Zietsman Property Group. “Social media, gaming and technology companies continue to expand their office space in L.A. and will help this economy recover faster than other major markets.”
While activity definitely slowed down last year, the market still managed to outperform the national market. For instance, Los Angeles and Orange Country saw a 28% decrease in large office transactions, compared to the 45% decrease nationally.
Zietsman cites the market’s diverse economy as a reason for growing office demand and expects the area to make a comeback, but this won’t happen overnight.
“I expect there to be a short to medium term pullback in demand as certain tenants embrace the work-from-home model partially or completely,” said Zietsman. “However, I believe that people enjoy the interaction with colleagues at work and benefit from proximity to the leaders of their companies.”