Investors Look to East and West Ends of Valley

As part of the greater Los Angeles market, the San Fernando Valley has seen a surge in growth last year, according to new data from CBRE Group.

The brokerage released its report on investment volumes for the fourth quarter and full-year 2021. Greater Los Angeles proved to be the leading market in the nation with an 83 percent increase year-over-year to $58 billion in 2021, followed by New York and Dallas. While multifamily and industrial investments lead other specialties, office volume nationwide surged 73 percent from COVID-suppressed levels in the fourth quarter.

Locally, Kyle Barratt, first vice president at CBRE, said investors are looking for a stable investment, especially in multifamily and industrial. The firm breaks down the San Fernando Valley into three submarkets: East Valley with the Tri-Cities, Central Valley and West Valley.

“Out of those three sectors, we’re seeing most of the investment dollars are coming from West L.A. and going into East Valley and West Valley,” Barratt said.

With Burbank and Glendale in the Tri-Cities, industrial has been driven by entertainment. Office has also been increasing for Burbank.

“Burbank is by far outperforming Glendale and Pasadena especially in office, driven by entertainment,” Barratt said. 

According to CBRE data, Burbank has 5.6 percent direct vacancy rate and 872,491 available square feet while Glendale has 19.2 percent direct vacancy and 1.7 million square feet available.

Barratt noted, as an example of the heat in Tri-Cities, the DreamWorks campus in Glendale at 1000 Flower St., which sold to Brookfield for $327 million.

In the West Valley, “you typically have new product there. Much larger floor plates. Better ceiling heights. Better credit of tenant,” Barratt said.

Life sciences and biotech has been attracting large leases and tenant migrations in the West Valley but also in unlikely parts such as Tarzana, where Instil Bio did a conversion from office to wet lab in a part of town “that hasn’t been pegged as a traditional life science hub,” Barratt said.

Barratt said that National Institute for Health funding has been a driver in the life sciences space.

“Life science has been very much elevated during the pandemic,” he said. “But not all offices can be converted to labs or life sciences.”

Barratt also noted a “massive shift” to the user/owner model for commercial buildings. “We’re seeing a flight from towers to suburban low-rise buildings with convenient access, parking and talent,” he said.

Among the national report’s highlights: 

• Total U.S. commercial real estate investment volume of totaled $746 billion  for the year, including $296 billion in the fourth quarter, both record numbers.

• Multifamily led all sectors for investment volume at $315 billion for the year.

• Although Los Angeles and New York had the highest levels of investment in 2021, Sun Belt markets had the strongest year-over-year growth rates, including Las Vegas (232 percent), Houston (191 percent) and South Florida (179 percent).

• Private buyers accounted for the most fourth-quarter investment volume ($143 billion), while REITs/public companies had the highest year-over-year growth rate of 153 percent to $35 billion.