LA’s Westside Benefits From Strong Economic Conditions

September 28, 2017
By: Karen Jordan, Bisnow Los Angeles

While many have been debating what part of the cycle we are in, could we be in a downturn? That was one of the questions posed to panelists at Wednesday’s Bisnow Westside LA Expansion event held at 777 Aviation in El Segundo.

The answer is no, according to Artisan Realty Advisors Managing Partner and co-founder Mark Laderman. “I think investors are cautious. At the same time, debt is plentiful and cheap, which is something to be careful about,” Laderman said. The reality is we are susceptible to macroeconomic issues, according to Laderman.

“I think the key is to invest in locations that you believe are going to get better over time,” he said.

LA is a small-tenant market with the exception of when big companies come along and take up a lot of space, such as Netflix, according to Laderman. The reality is the market ebbs and flows for big tenants, he said.

Rockwood Capital Managing Partner Tyson Skillings said the macroeconomic indicators right now are still strong. “We’re arguably getting close to full employment,” Skillings said. A lot of companies are sitting on a lot of cash right now. He said his company is taking a long-term view. Rockwood Capital, Lowe Enterprises and Aecom Capital recently broke ground on Ivy Station in Culver City. Skillings said it is a long-term investment for his company. Ivy Station is a project that includes around 200 apartments, more than 200K SF of office, a 150-room hotel and a large park.

What all developers have to be concerned about these days are escalating construction costs. “That’s a development-killer right there,” Tishman Speyer Managing Director John Ollen said. As a result of construction costs being up, it is necessary to achieve high rents to make deals pencil, according to Cypress Equity Investments Vice President of Acquisitions Adrian Berger. In cities like Santa Monica, those rents are achievable. Something else the Westside has going for it is that banks like to lend on the Westside, according to CityView Director of Investments Stephen Anderson.

Things are looking up in El Segundo in particular. “Everything going on in El Segundo right now is very positive, in our opinion,” CBRE Global Investors Senior Director of Acquisitions Gardner Ellner said. His company recently closed on a deal, 1700 Walnut in El Segundo. It is now 100% leased.

George Smith Partners' Steve Bram, Cypress Equity Investments' Adrian Berger, Acore Capital's Josh Katzin, CBRE's Gardner Ellner and CityView's Stephen Anderson
George Smith Partners’ Steve Bram, Cypress Equity Investments’ Adrian Berger, Acore Capital’s Josh Katzin, CBRE’s Gardner Ellner and CityView’s Stephen Anderson
Cypress Equity Investments' Adrian Berger and CBRE Global Investors' Gardner Ellner
Cypress Equity Investments’ Adrian Berger and CBRE Global Investors’ Gardner Ellner