Could July Investment Activity Signal a Rebound?

Southern California investment volumes hit $3 billion in July, the highest monthly total in 2020.

By Kelsi Maree Borland | September 01, 2020 at 04:00 AM

July investment volumes in Southern California could be signaling a rebound in activity. In July, investment volumes surpassed $3 billion, according to a report from CBRE. The month was the highest monthly total in 2020 to date.

“The region’s uptick in sales volumes reflects increased investor confidence in the long-term stability of the regional economy and positive prospects for real estate investments,†Eric Willett, regional director of research at CBRE, tells GlobeSt.com. “With the impacts of the COVID-19 pandemic reverberating throughout the commercial real estate industry, since March investors have slowed their pace of deploying capital. The recent uptick, though, suggests that some investors are willing to come off the sidelines for the right opportunities.â€

The trend has been building. In late June, Blackstone purchased a 49% stake in Hudson Pacific’s Los Angeles media portfolio for $1.65 billion. The deal speaks to investors’ reentry into the market. “The Blackstone/Hudson Pacific portfolio is a great example of this dynamic: Blackstone’s blockbuster investment in Hudson Pacific’s portfolio of class-A office and production space is an emphatic bet on the sustained dynamism of L.A.’s unmatched content ecosystem,†says Willett.

While July was a good sign for investment activity rebounding, sales volumes still fell well below historical norms. The same report show that investment sales volumes are down 40% or $10.1 billion this year compared to 2019. “Year-to-date investment volumes are down substantially. More than anything, this reflects the dramatic decline in activity we saw in March, April and May as investors pressed pause on investment plans in the face of a rapidly evolving pandemic and economic crisis,†says Willett.

In terms of asset classes, most sale activity has flooded into office assets with a total of $4.4 billion invested in office March through July of this year. Industrial came in second with $2.6 billion invested March through July. “Despite near-term weakness in demand and the prospect of new patterns of usage for office space, Southern California investors still see long-term growth in regional office assets, especially in creative or specialized office spaces that appeal to the region’s major drivers of growth such as tech and media or life sciences,†says Willett.

While July was a bright note in a dull year, Willett expects investment volumes to remain drab through 2021. “The pandemic and adverse economic conditions are expected to be a drag on sales through 2021, likely keeping activity below the intense pace seen over the last three years,†he says. “But, we anticipate that investment volumes are likely to continue their rebound through the end of the year as confidence in a recovery continues to build.â€