Industrial Capital Markets

Transaction activity in Central Los Angeles is picking up in 2024. In the first quarter alone, sales volume hit $120 million, followed by another $35 million in the second quarter. Investors are moving quickly to close deals before the ULA transfer tax raises costs, resulting in 80% of last year’s sales happening in just the first quarter.

While valuations are under pressure due to falling rents, the bigger issue is rising cap rates, which have jumped by over 100 basis points, now sitting in the mid-5% range. For example, in June 2024, private investors sold a fully leased 21,100 square foot building for just over $6 million, translating to about $285 per square foot, at a 5.8% cap rate.

Despite this downward trend, the strong rent growth seen before 2022 is still providing investors with opportunities for mark-to-market adjustments and capital gains. A case in point is Fortress Investment Group, which bought a 73,600 square foot building at 320-336 W 31st Street for $22 million in May 2021 and then sold it to Planned Parenthood for $37.9 million, or $514 per square foot, in March 2024.

The new owner is planning to expand both its headquarters and overall footprint.

Source: CoStar