USC Marshall

Southern California office and industrial markets are slowing sharply in 2008 and will continue to feel the effects of business closures and slower global trade in 2009. The indicators point to persistent high vacancy rates and weaker office demand in all submarkets. Orange County was the first to see the slowdown and has the largest supply of sublease space. Unfortunate timing of new office space in the Inland Empire has led to vacancy rates approaching 20 percent. There is considerable uncertainty in the region’s economic outlook until the credit markets begin functioning normally again.

In recent years, Class A office rents have soared in the West Los Angeles submarket. Although the influx of new tenants and tenant renewals have helped to drive this increase, sales of office buildings at record prices have also played a role as investors seek higher returns to recoup substantial investments. This paper investigates the relationship between recent office sales in West LA and subsequent rent increases. We also examine the capital market forces and CMBS that helped drive office sales and measure the effects on asking rents for sold Class A office properties in West L.A.

This paper presents spatially explicit analyses of the greenspace contribution to residential property values in a hedonic model. The paper utilizes data from the housing market near the downtown of Los Angeles. We first used a standard hedonic model to estimate the greenspace effects. Because the residuals were spatially autocorrelated, we then implemented two spatial models, a spatial autoregressive error and spatial filtering model. Our results indicate that neighborhood greenspace has a significant impact on house prices even after controlling for residual spatial autocorrelation. The different estimation results from non-spatial and spatial models provide useful bounds for the greenspace effect. Greening of inner city areas may provide a valuable policy instrument for elevating depressed housing markers in inner-city areas.

The Southern California apartment market is poised to weather the housing downturn and credit crunch as long as job losses are not too severe. Renting remains attractive when mortgages are harder to obtain for high-priced homes. Although the national economy is skating close to a recession, the apartment market is supported by demand for trade, regional economic strength, and higher paying jobs in healthcare and professional services

In 2006, the combined Los Angeles and Long Beach Ports cargo volume was a record 15.8 million twenty-foot equivalent units (TEUs), compared to second place New York’s 5.1 million TEUs. The trade volume through the ports ranks first in the nation and fifth globally and is projected to increase by an average annual rate of 8.5 percent over the next decade. The warehousing, trans-loading, and distribution of these goods require a significant amount of warehouse space in close proximity to the ports.

Because Los Angeles is predominantly built out, the Inland Empire, consisting of San Bernardino and Riverside Counties, has become the ideal location for distribution and logistics warehouses. Located 50 miles inland, the Inland Empire can accommodate warehouse space with its available land parcels, transportation infrastructure, and large blue-collar labor force. Over the past decade, the growth in trade volume has shaped the industrial real estate landscape in the Inland Empire and will continue to shape it as international trade increases.