San Diego commercial real estate reached the highest figures since the first half of 2007.

San Diego is Top Target for Investment

Carrie Rossenfeld Finance & Capital Markets

CBRE reports that, according to a recent survey of commercial real estate investors by the firm, San Diego ranks as a top-11 target for investment among America’s metros. San Diego, which investors ranked at number 17 in 2017, jumped six spots to number 11 in CBRE’s 2018 Americas Investor Intentions Survey.

The survey, which covered all asset types, shows that 88 percent of investors plan either to maintain or increase spending in 2018 — up from 83 percent in 2017. The survey also looked at how investors view each of the different asset types, and the following were the results.

Industrial is increasingly the preferred property type, cited by 50 percent of investors as the most attractive for investment in 2018, up from 38 percent in 2017. Cited by 20 percent of investors, multifamily is the next most attractive property type, though its share decreased from last year. Fourteen percent of investors said they are planning to invest in office product in 2018, and, despite competition from e-commerce, the retail sector improved modestly from last year (10 percent in 2018 vs. 8 percent in 2017).

Louay Alsadek, EVP, institutional properties, capital markets for CBRE, says, “Many new investors are coming to San Diego who are attracted to the region’s strong market fundamentals such as low vacancy, a diversified economy, a lack of development sites, and the lowest construction deliveries for office and industrial properties on the West Coast. Additionally, existing companies and new start-ups in our growth industries, such as life science and technology, have continued to increase their presence in the region, which has fueled net absorption and rent growth. Moving forward, San Diego’s positive economic fundamentals will continue to attract investors.”

The survey also provided insight into how investors view the growing trend of co-working. At 20 percent of a building’s total space, more than 90 percent of investors see co-working as having a positive or neutral effect on a building’s long-term capital value. However, more than half of the respondents said that once co-working space climbs to 40 percent or more of a building’s total space, it adversely affects valuations.

“Despite the possibility of escalating interest rates, the vast majority of investors intend to acquire assets in the Americas in 2018,” says said Brian McAuliffe, president, institutional properties, capital markets for CBRE. “Risk tolerance is expected to remain unchanged, but investors’ search for yield and asset diversification is pushing them toward value-add assets, secondary markets and alternatives in 2018.”

by Carrie Rossenfeld