The year 2013 brought many changes to the commercial real estate industry, across all asset types – office, retail, multifamily, hospitality and industrial. A review of these changes demonstrates substantial market improvements, with some lingering stagnation in activity and investment performance.

The office market segment saw trends toward more efficient use of space and more collaborative work areas, with continued integration of technology. Unfortunately, this was clearly manifested in statistics which show that while office employment was growing at about 2%, demand for office space was growing at only about 1%.

Industrial property investors saw improving occupancy gains and a widening recovery, with little new warehouse space being delivered to the market. Manufacturing continued to expand, and job growth in utilities and transportation led all other sectors in the service industry.

Sales of retail assets doubled from the same period in 2012, and retail properties experienced a 12 percent price appreciation. The Los Angeles metropolitan area vacancy rate for retail stood at 6% as of the third quarter of 2013.

Prices for apartment buildings rose 14 percent by 2013Q3, reaching an average unit price of over $107,000 nationally. The multifamily vacancy rate for the Los Angeles metro area reached a stunning 3.1% for the same period.

Banks returned to the hospitality investment segment, and credit-worthy projects found readily available financing. Adaptive reuse became prominent as investors pursued the repurposing of dated urban properties into hotels.

Commercial real estate professionals enjoyed the improvements experienced in 2013, and look forward to 2014 with hope for continued recovery.

Brian Brubaker, Chairman

BHGLAAR Commercial Committee