Commercial property investment market improving, brokers say

With the economy apparently stabilizing, commercial real estate investors have jumped into several markets in the West, brokers said.

“There is a lot of capital that needs to get out,” said broker Kevin Shannon of CBRE Group Inc. “People have fresh allocations for both debt and equity and … want to put it to work.”

The hottest markets for buyers in search of Class A office buildings are Seattle and San Francisco, he said, but activity should pick up in Southern California too. A high-rise at 400 S. Hope St. in downtown Los Angeles just hit the market and Shannon expects there will be competition to buy it. The 26-story tower formerly known as Mellon Bank Center has an assessed value of more than $225 million.

Attractive secondary markets for office buyers who don’t want to compete with the biggest investors include Denver, Portland, Ore., Phoenix and Orange County, he said. The long-suffering Inland Empire, where vacancy was above 23% at the end of last year, also holds promise.

“People have been afraid to go there,” he said, but it’s a small market with limited options for renters and its fortunes will turn around quickly if the economy continues to improve.

Shannon spoke at the CBRE/Allen Matkins online market forecast recorded in Burbank.

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