LA Commercial Real Estate in 2024

2023 clearly saw a return of real estate transactions after the doldrums of the pandemic period. If there was a year when people truly felt normality had returned, it was definitely this year. That said, the California market didn’t necessarily take off like a rocket. It was more of a steady swirl in circles. The commercial side of the picture in particular has still been struggling with significant vacancy levels compounded by the failures and absence of retail tenancies. The biggest factor for both has been the resistance of a full return from remote work to the office which, of course, Steven Taylor Los Angeles real estate expert notes has a corollary effect on retail as well.

E-Commerce Continues to Push Logistics Space

On the other hand, industrial real estate has remained strong, primarily for logistics, storage and transport interim bases due to the continued drive of e-commerce. Wherever there was a vacancy, it was quickly filled up with logistics customers and shipping operations.

A Market With Competing Pressures

Going into the next year, it’s fully expected that the market will go into a bit of a tug of war, pulling in opposite directions. On the one hand, financing rates and similar will be a bit more expensive given the 2 or 3 percent rise in mortgage rates for property purchasing. Additionally, companies have not been in a hurry to expand their space needs either. While there are lots of job notices, hiring is down and a good number of layoffs have been happening, reducing office demand even more. Given inflation and the cost of living versus what people earn, movement out of California added to remote work has triggered a migration, which in turn reduces office needs even more. However, companies also need a presence to make their long-term leases worth the money being spent. So hard pushes for occupancy and return-to-work have also been occurring as well, pushing in the opposite direction.

Ironically, the government has been expanding its footprint in certain markets like Los Angeles. With commercial real estate markets discounted, there have been very good opportunities for agencies to either relocate or expand their property holdings for programs.

Expectations Going Forward

2024 is going to be an interesting year for commercial real estate for the LA area as well as regionally and nationally. It’s very much a market of momentary opportunities with discounts and movements that may last for a few days or weeks, and then they close up. Again, the market will continue to gain strength and then stop unexpectedly, creating “dead” points as well. For investors who are used to bumpy markets, 2024 is going to be a potentially attractive period for quick movement between periods of no action.

The major change Steven Taylor LA expertise in the matter sees, however, could push the market into a positive demand point would be a very large push for return-to-work. A number of big players have signaled the same, like Amazon for example. However, that type of change has to be far more than just one industry. If it could be sustained, then retail space demand could see a secondary effect as well, but this would be much further into the year and probably 2025 before the impact in retail is realized. It’s definitely going to be the kind of market where professional help is essential to navigate it.