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It is no secret that the sharing economy has put a burden on housing markets across the country, most notably through Airbnb and other short-term rental exchanges like it. As small-time investors snatch up spaces for the sole purpose of using them as short-term rental properties, housing markets have suffered. The Los Angeles-area housing market has felt the impact of the sharing economy through severe shortages and rapidly rising rental rates, as noted by the Los Angeles Times last year. But how has the sharing economy affected the hotel industry? Still Strong, But Vulnerable To Disruption Although some companies are reporting little to no effect, recent research shows that traditional space providers across the country are vulnerable to disruption by the sharing economy. As real estate demands shift, hotels seem to be among the sectors most threatened. For now, however, the hotel industry in Southern California continues to do well. As of July, hotels in Los Angeles had nearly double the occupancy rates of Airbnb rentals in the area. Showing further resilience, hotels in LA experienced positive growth of more than 8 percent, while Airbnb saw negative growth. An Evolving Industry The emergence of the sharing economy has certainly made waves in national and local commercial real estate markets. Hotels continue to prosper for the moment. Clearly, however, Airbnb and similar services are offering up some competition that is difficult to ignore. Recent partnerships between major travel management companies and Airbnb – as well as Airbnb’s recently increased lobbying presence in Washington, D.C. – may be indicative of a further-changing market that could challenge hotels to adapt sooner than later. Another factor is the fact that local government regulation short-term rentals in response to the rise of Airbnb and other sharing sites remains a highly contentious subject. As we noted in our July 28 post, these local rules are – well, to use the obvious pun – up in the air, not only in Los Angeles but across the country.

It is no secret that the sharing economy has put a burden on housing markets across the country, most notably through Airbnb and other short-term rental exchanges like it. As small-time investors snatch up spaces for the sole purpose of using them as short-term rental properties, housing markets have suffered. The Los Angeles-area housing market has felt the impact of the sharing economy through severe shortages and rapidly rising rental rates, as noted by the Los Angeles Times last year. But how has the sharing economy affected the hotel industry? Still Strong, But Vulnerable To Disruption Although some companies are reporting little to no effect, recent research shows that traditional space providers across the country are vulnerable to disruption by the sharing economy. As real estate demands shift, hotels seem to be among the sectors most threatened. For now, however, the hotel industry in Southern California continues to do well. As of July, hotels in Los Angeles had nearly double the occupancy rates of Airbnb rentals in the area. Showing further resilience, hotels in LA experienced positive growth of more than 8 percent, while Airbnb saw negative growth. An Evolving Industry The emergence of the sharing economy has certainly made waves in national and local commercial real estate markets. Hotels continue to prosper for the moment. Clearly, however, Airbnb and similar services are offering up some competition that is difficult to ignore. Recent partnerships between major travel management companies and Airbnb – as well as Airbnb’s recently increased lobbying presence in Washington, D.C. – may be indicative of a further-changing market that could challenge hotels to adapt sooner than later. Another factor is the fact that local government regulation short-term rentals in response to the rise of Airbnb and other sharing sites remains a highly contentious subject. As we noted in our July 28 post, these local rules are – well, to use the obvious pun – up in the air, not only in Los Angeles but across the country.

The historic Ford Factory building in downtown Los Angeles has undergone many transitions since its construction over a century ago. Its recent metamorphosis into an office building with retail space has been slow in catching on, and the owners have been trying to close on commercial leases for the building for two years. Many leasing agents understand that closing one substantial tenant is often the catalyst that propels a massive project toward success. Agents and brokers in the Arts District had been optimistically monitoring negotiations between the owners of the Ford Factory and Buzzfeed, which expressed interest in a large office space in the newly renovated building. Owners of nearby commercial buildings had been hoping for a significant lease that would create a ripple effect in the district, attracting clients to smaller properties in close proximity. When the entertainment company backed out of the deal, many thought the plans for the Arts District would fail. Finally, the building’s owners closed a 13-year deal with Warner Music Group to lease 257,000 square feet of office space in the converted factory. The lease is the largest in the downtown area so far this year, and the first with a notable tenant. Almost immediately, other businesses began inquiring about property and offices in the Arts District to be close to Warner Music. Agents say entertainment companies and retailers will have more confidence in acquiring space now that the music giant has made a commitment. The prospects for downtown Los Angeles are exciting as thousands of Warner employees will be looking for places to work, live, eat and relax. Business owners wanting to be a part of the positive changes coming to the Arts District find advice and guidance from an experienced real estate attorney. Commercial leases can be complex and involve a significant investment, and a skilled attorney will protect one’s interests and make the process as smooth as possible. Source: therealdeal.com, “ Warner Music lease is already having ripple effect on Arts District “, Cathaleen Chen, Oct. 10, 2016

The historic Ford Factory building in downtown Los Angeles has undergone many transitions since its construction over a century ago. Its recent metamorphosis into an office building with retail space has been slow in catching on, and the owners have been trying to close on commercial leases for the building for two years. Many leasing agents understand that closing one substantial tenant is often the catalyst that propels a massive project toward success. Agents and brokers in the Arts District had been optimistically monitoring negotiations between the owners of the Ford Factory and Buzzfeed, which expressed interest in a large office space in the newly renovated building. Owners of nearby commercial buildings had been hoping for a significant lease that would create a ripple effect in the district, attracting clients to smaller properties in close proximity. When the entertainment company backed out of the deal, many thought the plans for the Arts District would fail. Finally, the building’s owners closed a 13-year deal with Warner Music Group to lease 257,000 square feet of office space in the converted factory. The lease is the largest in the downtown area so far this year, and the first with a notable tenant. Almost immediately, other businesses began inquiring about property and offices in the Arts District to be close to Warner Music. Agents say entertainment companies and retailers will have more confidence in acquiring space now that the music giant has made a commitment. The prospects for downtown Los Angeles are exciting as thousands of Warner employees will be looking for places to work, live, eat and relax. Business owners wanting to be a part of the positive changes coming to the Arts District find advice and guidance from an experienced real estate attorney. Commercial leases can be complex and involve a significant investment, and a skilled attorney will protect one’s interests and make the process as smooth as possible. Source: therealdeal.com, “ Warner Music lease is already having ripple effect on Arts District “, Cathaleen Chen, Oct. 10, 2016

Investing in real estate is reputable for being profitable. Investors have a vast range of options, and one of them is commercial real estate (CRE), which is gaining a lot of attention as time goes by. This is because it has a higher income yield and low maintenance costs. However, you should consider crucial aspects when investing in CRE, including the property type. Here is what you should know about this factor. Decide a property type CRE includes offices, retail, industrial and multifamily units. With offices, you will rent office spaces to businesses like law and accounting firms. These are the typical corporate-style workspaces. Retail CRE is for retail purposes. Thus, your clients will be shopping centers, restaurants, coffee shops and healthcare facilities. With industrial spaces, you will rent to companies with heavy processes, such as manufacturing, storage (warehouses), assembly and production. Lastly, multifamily CRE defines the larger residential complexes with many units. They are for residential purposes but generate high rental income, hence commercial properties. You should know which property type to invest in to make your work more manageable. It can be challenging to look at all types, and the market can have hundreds of each. Thus, consider the pros and cons of each and choose a type you can manage. Decide occupied or empty When investing in CRE, you can purchase a building that’s already occupied or an empty one, in which you will market to find tenants. Further, you can buy land and build the property. It will be best to know which one you want from the beginning to make informed decisions. The property type you invest in is crucial. You should obtain adequate information about the industry to make the right moves.

Investing in real estate is reputable for being profitable. Investors have a vast range of options, and one of them is commercial real estate (CRE), which is gaining a lot of attention as time goes by. This is because it has a higher income yield and low maintenance costs. However, you should consider crucial aspects when investing in CRE, including the property type. Here is what you should know about this factor. Decide a property type CRE includes offices, retail, industrial and multifamily units. With offices, you will rent office spaces to businesses like law and accounting firms. These are the typical corporate-style workspaces. Retail CRE is for retail purposes. Thus, your clients will be shopping centers, restaurants, coffee shops and healthcare facilities. With industrial spaces, you will rent to companies with heavy processes, such as manufacturing, storage (warehouses), assembly and production. Lastly, multifamily CRE defines the larger residential complexes with many units. They are for residential purposes but generate high rental income, hence commercial properties. You should know which property type to invest in to make your work more manageable. It can be challenging to look at all types, and the market can have hundreds of each. Thus, consider the pros and cons of each and choose a type you can manage. Decide occupied or empty When investing in CRE, you can purchase a building that’s already occupied or an empty one, in which you will market to find tenants. Further, you can buy land and build the property. It will be best to know which one you want from the beginning to make informed decisions. The property type you invest in is crucial. You should obtain adequate information about the industry to make the right moves.

The Clinton and Trump campaign camps didn’t really focus on the unemployment rate or the jobs report in their respective conventions, but the latest jobs report supports what analysts have been saying about the commercial real estate market for months. The national economy added 225,000 new jobs in July, and the unemployment rate remained unchanged at 4.9 percent. Overall, analysts determined that 1.3 million jobs have been added since the beginning of 2016. The professional and business sector added about 70,000 jobs. Additionally, the financial services sector added 18,000 jobs and hospitals added 17,000. The services industry also accounted for $19,000 jobs. Even the construction industry added jobs, which is not particularly common in summer months given how many projects are already underway. The common denominator between these is that they all call for additional office space, which arguably accounts for the increase in commercial real estate projects across Southern California. We noted in our prior post the trends that could dictate the future of commercial real estate projects, and the increasing need for office space corresponds with these trends. It remains to be seen whether the construction growth will continue in earnest. After all, the possibility of the Fed raising interest rates this fall is a viable possibility. In the meantime, investors and developers must make the best of existing opportunities, and an experienced real estate lawyer can help move potential to reality. If you need assistance or have pressing finance questions, a real estate attorney can advise you.

The Clinton and Trump campaign camps didn’t really focus on the unemployment rate or the jobs report in their respective conventions, but the latest jobs report supports what analysts have been saying about the commercial real estate market for months. The national economy added 225,000 new jobs in July, and the unemployment rate remained unchanged at 4.9 percent. Overall, analysts determined that 1.3 million jobs have been added since the beginning of 2016. The professional and business sector added about 70,000 jobs. Additionally, the financial services sector added 18,000 jobs and hospitals added 17,000. The services industry also accounted for $19,000 jobs. Even the construction industry added jobs, which is not particularly common in summer months given how many projects are already underway. The common denominator between these is that they all call for additional office space, which arguably accounts for the increase in commercial real estate projects across Southern California. We noted in our prior post the trends that could dictate the future of commercial real estate projects, and the increasing need for office space corresponds with these trends. It remains to be seen whether the construction growth will continue in earnest. After all, the possibility of the Fed raising interest rates this fall is a viable possibility. In the meantime, investors and developers must make the best of existing opportunities, and an experienced real estate lawyer can help move potential to reality. If you need assistance or have pressing finance questions, a real estate attorney can advise you.

In a number of our posts, we have noted how the desire for commercial real estate may be slowing even though some of the prime indicators (e.g. vacancy rates, cost per square foot, overall economic growth) may suggest that there are still opportunities for investors to take advantage of. However, the key is to purchase a property or enter into a development agreement at the right time. For many investors, the best time to do so is at the lowest point of a downturn, and according to a recent wallstreetdaily.com report, the time to invest in commercial real estate may be coming soon. The report suggests that the next economic downturn may seriously affect the commercial real estate market, especially considering how some retailers are struggling against their online counterparts. Analysts worry about vacancy rates being higher than their pre-recession levels, but with so much more commercial space available compared to pre-recession rates, the elevated number of vacancies could be attributable to overbuilding. Also, the market for commercial mortgage backed securities (CMBS) is not behaving normally. The market has not bounced back since a correction in the early part of 2016 sent prices spiraling downward. Further, with the FDIC, Federal Reserve and the Office of the Comptroller of the Currency expressing concerns over underwriting standards for commercial real estate loans, these factors all spell potential disaster for the market. In times like this, it is important to review one’s legal options in the event the market sees a crash reminiscent of the 2008 housing crisis.

In a number of our posts, we have noted how the desire for commercial real estate may be slowing even though some of the prime indicators (e.g. vacancy rates, cost per square foot, overall economic growth) may suggest that there are still opportunities for investors to take advantage of. However, the key is to purchase a property or enter into a development agreement at the right time. For many investors, the best time to do so is at the lowest point of a downturn, and according to a recent wallstreetdaily.com report, the time to invest in commercial real estate may be coming soon. The report suggests that the next economic downturn may seriously affect the commercial real estate market, especially considering how some retailers are struggling against their online counterparts. Analysts worry about vacancy rates being higher than their pre-recession levels, but with so much more commercial space available compared to pre-recession rates, the elevated number of vacancies could be attributable to overbuilding. Also, the market for commercial mortgage backed securities (CMBS) is not behaving normally. The market has not bounced back since a correction in the early part of 2016 sent prices spiraling downward. Further, with the FDIC, Federal Reserve and the Office of the Comptroller of the Currency expressing concerns over underwriting standards for commercial real estate loans, these factors all spell potential disaster for the market. In times like this, it is important to review one’s legal options in the event the market sees a crash reminiscent of the 2008 housing crisis.

Overall, commercial real estate has been on the upswing for seven years, both nationally and in Southern California. The end of the Great Recession brought a bull market, with rising rents for commercial property. Experts are now uncertain whether this can continue. However, the struggles of one component of the market, namely retail stores, seem likely to continue. In this post, we will address two main questions. First, is commercial real estate as a whole really on the proverbial bubble? And second, what are the realistic prospects for commercial retail given the dynamic increase in online shopping? Trends in the CRE market Nationally, it isn’t difficult to find pundits who are concerned about a possible downturn in the commercial real estate (CRE) market. One concern is of course that the market is overbuilt, with too many properties and too few potential buyers or renters. There are also other complicated economic factors in play. These factors include the availability of credit under the Federal Reserve’s quantitative easing policies and the viability of commercial mortgage backed securities as an investment. For now, the market remains remarkable robust overall. One key indicator – the Green State U.S. Commercial Property Price Index – has doubled since the Great Recession ended. This index is still rising, at a rate of 7.5 percent. These national trends are reflected in Southern California as well. Since 2009, Los Angeles-area rents are up more than 19 percent. Risk of a downturn? So is commercial real estate in Greater Los Angeles really at serious risk of a downturn? One view is that LA is well positioned for continued growth. The rationale for this view is that a diversified economy and a desirable location will continue to attract investment and appeal to prospective tenants, at least in the office market. We discussed the international aspects of these investments in our June 4 post. An opposing view is that a bullish cycle lasting seven years is drawing to a close. This doesn’t mean a 2007-level crash is coming, but rather the possibility of stagnant or declining prices. No one has a crystal ball to foresee how this will unfold. But at least one CRE trend seems crystal clear: the ongoing decline of bricks-and-mortar retailers. Bricks-and-mortar struggles Online shopping has changed the game in retail. It isn’t only that some big national brands, such as Borders and Sharper Image, are gone. Many other bricks-and-mortar retail stores, for companies of all sizes, are threatened by the explosion in Internet commerce. To be sure, tech is, as always, a double-edged sword. When Amazon builds a big distribution center, it is a boost for the real estate market in that area. There is no doubt, however that retailers of all kinds are struggling to keep physical stores open as the consumer migration online continues to evolve. And this will mean less demand for commercial retail space. Making strategic decisions For commercial real estate professionals, the trends we’ve discussed in this post have to be consciously weighed and evaluated. There’s an abundance of information to digest and analyze. As you consider your specific goals, it’s important to get knowledgeable legal counsel. With a skilled attorneys’ help, you can create and execute a sound legal framework for your strategic decisions.

Overall, commercial real estate has been on the upswing for seven years, both nationally and in Southern California. The end of the Great Recession brought a bull market, with rising rents for commercial property. Experts are now uncertain whether this can continue. However, the struggles of one component of the market, namely retail stores, seem likely to continue. In this post, we will address two main questions. First, is commercial real estate as a whole really on the proverbial bubble? And second, what are the realistic prospects for commercial retail given the dynamic increase in online shopping? Trends in the CRE market Nationally, it isn’t difficult to find pundits who are concerned about a possible downturn in the commercial real estate (CRE) market. One concern is of course that the market is overbuilt, with too many properties and too few potential buyers or renters. There are also other complicated economic factors in play. These factors include the availability of credit under the Federal Reserve’s quantitative easing policies and the viability of commercial mortgage backed securities as an investment. For now, the market remains remarkable robust overall. One key indicator – the Green State U.S. Commercial Property Price Index – has doubled since the Great Recession ended. This index is still rising, at a rate of 7.5 percent. These national trends are reflected in Southern California as well. Since 2009, Los Angeles-area rents are up more than 19 percent. Risk of a downturn? So is commercial real estate in Greater Los Angeles really at serious risk of a downturn? One view is that LA is well positioned for continued growth. The rationale for this view is that a diversified economy and a desirable location will continue to attract investment and appeal to prospective tenants, at least in the office market. We discussed the international aspects of these investments in our June 4 post. An opposing view is that a bullish cycle lasting seven years is drawing to a close. This doesn’t mean a 2007-level crash is coming, but rather the possibility of stagnant or declining prices. No one has a crystal ball to foresee how this will unfold. But at least one CRE trend seems crystal clear: the ongoing decline of bricks-and-mortar retailers. Bricks-and-mortar struggles Online shopping has changed the game in retail. It isn’t only that some big national brands, such as Borders and Sharper Image, are gone. Many other bricks-and-mortar retail stores, for companies of all sizes, are threatened by the explosion in Internet commerce. To be sure, tech is, as always, a double-edged sword. When Amazon builds a big distribution center, it is a boost for the real estate market in that area. There is no doubt, however that retailers of all kinds are struggling to keep physical stores open as the consumer migration online continues to evolve. And this will mean less demand for commercial retail space. Making strategic decisions For commercial real estate professionals, the trends we’ve discussed in this post have to be consciously weighed and evaluated. There’s an abundance of information to digest and analyze. As you consider your specific goals, it’s important to get knowledgeable legal counsel. With a skilled attorneys’ help, you can create and execute a sound legal framework for your strategic decisions.