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\n Bisnow\/Samantha D’Angelo\n <\/p>\n
\n UMTB USA\u2019s Oliver Anderson, Arc Capital Partners\u2019 Neville Rhone, Invesco\u2019s Kate Bassett, The Cottonwood Group\u2019s Tang Tang and CLA\u2019s Carey Heyman.\n <\/p>\n
The Los Angeles market is facing many of the same challenges\u00a0as other markets across the country, but it has some additional hurdles for investors to clear, which has dissuaded some investors from placing capital in the city.<\/p>\n
But while certain types of investors that once had a major presence in the area have receded, other types of buyers have stepped up to take their place, seeing opportunities where others might only see a minefield.\u00a0<\/p>\n
\u201cYou’re starting to see LA become a contrarian play,\u201d Northmarq<\/a> Managing Director Mike Smith said at Bisnow\u2019s Los Angeles CRE State of the Market Conference.\u00a0<\/p>\n \n Bisnow\/Samantha D’Angelo\n <\/p>\n \n U.S. Green Building Council – California\u2019s Ben Stapleton, Oaktree Capital Management\u2019s Jason Keller, Genesis Builders\u2019 Devang Shah, the city of Pasadena\u2019s Rick Cole and CBRE\u2019s Nicole Mihalka.\n <\/p>\n Smith said he has heard institutional capital leaders say that since Measure ULA<\/a> and the pandemic eviction moratoriums, they are \u201credlining<\/a>\u201d Los Angeles, a term used to refer to the practice of historically denying federally backed mortgages and other financing to borrowers of color who were considered too risky to invest in at the time.\u00a0<\/p>\n Those same institutional investors that see Los Angeles as too risky are nevertheless keeping an eye on the city and watching for a good point of entry, Smith told attendees at The Lot at Formosa.\u00a0<\/p>\n While the cap rates still aren’t\u00a0as low as some investors would like, there is anticipation among some that interest rates will drop soon and that might change the math, some panelists said.\u00a0<\/p>\n \n Bisnow\/Samantha D’Angelo\n <\/p>\n \n Avison Young\u2019s James Nelson, Northmarq\u2019s Mike Smith, CIM Group\u2019s Victor Difede, Forge Development Partners\u2019 Chris Fraley, KH Equities\u2019 Daniel Mense and MGO CPAs\u2019 Cesar Reynoso.\n <\/p>\n Smith\u00a0said that across the country in the first half of the year, a little over half of the buyers for office properties were private, but in Los Angeles, that figure was about 70%.\u00a0<\/p>\n \u201cThere’s a lot of private activity, there\u2019s a lot of interest in contrarian investing, which is great to see, and there’s a lot to do here. This is a massive market,\u201d Smith said.\u00a0<\/p>\n Overall, panelists\u00a0expressed confidence in at least pockets of the office market.<\/p>\n CIM Group<\/a> Vice President of Investments Victor Difede said CIM is starting to look more at office again,\u00a0adding that \u201creally attractive quality office\u201d is out there. \u00a0<\/p>\n \n Bisnow\/Samantha D’Angelo\n <\/p>\n \n Los Angeles Department of City Planning\u2019s Kevin Keller, The Max Collaborative\u2019s Kevin Ratner, California Landmark Group\u2019s Ari Kahan and Weaver\u2019s Evan Staggs.\n <\/p>\n But there was also great enthusiasm for conversions to residential, a badly needed product type in LA, where the multifamily vacancy rate hovers around 5%.\u00a0<\/p>\n New York has incentivized the conversion of outdated office to residential\u00a0with\u00a0tax breaks, including\u00a0up to a 35-year tax abatement<\/a>. Those tax breaks make the sometimes complex projects financially feasible, Forge Development Partners Chief Investment Officer Chris Fraley said. \u00a0<\/p>\n \u201cYour taxes are 10% of what they would be otherwise for 35 years, and it works,\u201d Fraley said. \u201cThat’s why we’re seeing so many conversions.\u201d<\/p>\n \n Bisnow\/Samantha D’Angelo\n <\/p>\n \n Wonderful Real Estate Development\u2019s Joe Vargas, the city of Los Angeles\u2019 Doane Liu, AEG Worldwide\u2019s Kevin Rieger, Chargie\u2019s Chris Vargas, the city of West Hollywood\u2019s Laura Biery, Los Angeles Sports & Entertainment Commission’s Kathryn Schloessman and Shawmut Design & Construction\u2019s Matt Stratton.\n <\/p>\n There\u00a0are\u00a0properties available\u00a0for conversions. The office market in Los Angeles has largely struggled to find its way after the pandemic. A third-quarter report from CBRE<\/a> found the office market has a roughly 24% vacancy rate.\u00a0<\/p>\n While the office market sorts itself out, some in the industry saw a silver lining to the fact that others are hesitating to come back to Los Angeles.\u00a0<\/p>\n \u201cIf there’s a flight of capital, then you know that that should, in theory, start to create more opportunities,\u201d KH Equities President Daniel Mense said.\u00a0<\/p>\n Multifamily was an area where panelists predicted rent growth, if only because they also anticipated a shortage in supply due in part to expected cautious sentiment among would-be developers about building new stock in the uncertain regulatory environment and in a market where Measure ULA is in place.\u00a0<\/p>\n \n Bisnow\/Samantha D’Angelo\n <\/p>\n \n Ledcor Development\u2019s John Santry, Talo Management Group\u2019s William Lowery, Greystar\u2019s Raul Tamez, SOM\u2019s Dan Herman and Greenberg Glusker\u2019s Kevin Sher.\n <\/p>\n<\/p>\n<\/p>\n<\/p>\n<\/p>\n<\/p>\n