AIR CRE’s 27th Annual SoCal Market Trends & Forecast event took place on Feb 26th at the JW Marriott at LA LIVE, in downtown Los Angeles. This is a marquee event for AIR CRE, and it sold out with almost 250 commercial real estate professionals in attendance.
The event brought together a panel of industry experts, from a variety of business sectors, to discuss the latest trends in CRE, moderated by Kurt Strasmann, Executive Managing Director of CBRE Orange County & Inland Empire offices, and AIR CRE’s 2020 President. The panelists included Doug Herzbrun, Chairman of Global Research at CBRE Global Investors, Darren Kenney, SVP, Investment Officer at Prologis, Lisa St. John, Principal at LA Realty Partners, Will Heidel, Development at Wilson Meany, John Carver, Deputy Executive Director at Los Angeles World Airports, Allen Narcisse, West Regional Vice President at Lyft, and 2020 NAIOP Legislative Chair, Stephane Wandel of Thrifty Oil Co.
Tim Hayes, AIR CRE’s Executive Director, kicked off the event with introductory remarks acknowledging AIR CRE’s Board of Directors and Past Presidents in attendance, before introducing Kurt Strasmann.
RESEARCH & GLOBAL TRENDS
Doug Herzbrun of CBRE Global Investors focused his presentation on the key impacts of technology on CRE, and what to expect in the future from the 4th industrial revolution. Key trends like autonomous vehicles, virtual and augmented reality, 3–D printing, data collection and storage, and smart system partnerships are all examples of “proptech” that are being developed to meet the demands of the CRE industry. Retail is a sector that is particularly being transformed by technology, with innovations like virtual dressing rooms, experiential spaces, and highly targeted advertising based on consumer spending and social habits. As Mr. Herzbrun commented, “This is the new world of proptech.”
Additionally, Mr. Herzbrun’s insights into both global and local market trends spoke to a larger, overarching theme – the concept of bringing a hospitality mindset to every property type, which results in the new propspeak of: guest, customer, community, advisor and place maker.
The theme of a “hospitality mindset” in relation to commercial real estate was also discussed by Darren Kenney of Prologis, who addressed the firm’s recent addition of a Chief Customer Officer to ensure focus on customer-oriented services.
Mr. Kenney focused on the increasing trend of online shopping and its massive impact on the industrial sector, including contributing to the lowest vacancy rates on record, last mile locations, vertical warehouses and the fact that it takes three times the amount of industrial square feet to facilitate the delivery of online products vs traditional brick and mortar stores.
From an investment market, Prologis views Los Angeles as a juggernaut $1B market, with room for increasing rents.
Lisa St. John of LA Realty Partners, broke down the key Westside office locations of Playa Vista and Culver City, hotspots whose growth has been driven by the “Google effect”, and have contributed to the ongoing expansion of Silicon Beach. 2.2M sf of office space is currently being developed on the Westside, spurred by demand by media companies like Apple and Amazon, and key players like Coffee Bean, Sweetgreen and Biomed.
While addressing WeWork’s recent challenges, Ms. St. John stated that “Co-working is here to stay, and it’s making landlords step their game up.” Unlike Manhattan, in LA WeWork properties are distributed throughout each local market, so one struggling property will not have a major impact on the market. Co-working properties with high-end amenities and contemporary design reign supreme, however, Ms. St. John notes that emerging startups and tech companies don’t necessarily know what they will need in terms of space, design and functionality a year or two down the road, so adaptability is crucial.
HOLLYWOOD PARK DEVELOPMENT
The concept of adaptability and creativity go hand in hand with Hollywood Park, the high-profile development project in Inglewood that is creating a dynamic, mixed-use neighborhood with retail, stadium, office, residential and transportation amenities like lite rail and dedicated ridesharing. Panelist Will Heidel of Wilson Meany, discussed how Hollywood Park, through contemporary design, strategic tenant selection and use of technology, is a true example of place–making, focused on long-term growth. He believes that the retail component is a critical piece of the development, and will be responsible for engaging the community outside of game days or entertainment, and will provide a unique experience in 10, 20 and 30+ years.
Allen Narcisse of Lyft highlighted that the convergence of technology and strategic partnerships is a key aspect of Lyft’s business model, noting that “we support infrastructure where it lives.” To that end, Lyft is working to supplement existing modes of transportation, such as partnering with the Big Blue Bus and providing scooters and ebikes at metro stops. Additionally, ridesharing aims to solve traffic problems by using technology to avoid congested areas and is partnering with popular destinations like the Hollywood Bowl and the LA Memorial Coliseum to designate dedicated pickup/drop off locations.
Panelist John Carver, of Los Angeles World Airports, discussed how every dollar spent by LAWA in its $14B capital improvement program is going towards improving the customer experience at LAX, the 2nd busiest airport in the world. Throughout construction, which is projected to last through 2023, LAX processes 89 million passengers per year, translating to almost 300,000 passengers per day, using 40,000 badged employees and a police force larger than that of many metropolitan cities. There is a major focus on sustainability, with every building achieving LEED Silver or above.
As a “working destination airport,” LAX is typically either the start or end to someone’s journey, unlike other airports that host passengers who never actually leave the airport, so there is a major focus on mitigating traffic which affects neighboring communities and local roadways. Key transportation projects on the horizon include a massive automated people mover that will connect terminals to each other, as well as to a new Metro train hub. Additionally, LAX is building the largest consolidated rental car facility in the world to alleviate parking congestion.
2020 NAIOP Legislative Chair, Stephane Wandel of Thrifty Oil Co., discussed a variety of legislative issues that can impact the CRE industry in CA. Most important is Prop 13, the Split Roll Tax, which will be on the on the November ballot. Mr. Wandel explained that the bill will negatively impact commercial property owners, the vast majority of which are small business owners, without the resources to shoulder the increased taxes they are likely to incur if the bill is passed.
If passed, this bill would be the largest tax increase in the history of CA, approximately $12 billion. NAIOP and AIR CRE both oppose the bill and believe that it requires an immediate call to action for all CRE professionals to spread the word, donate to relevant lobbying groups, and encourage others to vote NO on prop 13.
AIR CRE’s 2020 SoCal Market Trends & Forecast was an informative evening with industry leaders discussing the key market trends that will shape the coming months. To attend other AIR CRE events throughout the year, please visit our events page here.
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