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Los Angeles Real Estate Law Blog

Proptech to impact properties featuring commercial leases

Technology has transformed nearly all aspects of people's lives, and real estate in Los Angeles and other parts of California is no exception. Specifically, those who own properties featuring commercial leases will no doubt be impacted by proptech companies -- companies that produce technology related to properties -- in the years ahead. Here is a look at what proptech companies are doing and how this will impact real estate in 2018 and beyond.

Proptech businesses are producing applications designed to transform occupant experiences and building management. It is anticipated that proptech will be critical for every commercial real estate stakeholder in the coming years. These stakeholders include landlords, tenants and property managers.

Retail plays a large role in Los Angeles' real estate dominance

Across the country, retail locations of various types of stores are closing at a rapid pace. With more and more shopping opportunities available online, more consumers are choosing to spend their money from the comfort of their own homes. However, these trends are not necessarily true for Los Angeles.

For some time now, Los Angeles has remained one of the most expensive and highly sought real estate areas in the country. Currently, the popularity and growth of retail locations in this part of California is one of the reasons for the area's booming real estate market. At this time, vacancies for retail locations are low, which means they are in high demand by various types of businesses. 

LA commercial leases being renewed nearly 2 years ahead of time

The market for nonresidential properties appears to be relatively robust in Southern California. This is evidenced by the fact that the renters of large office spaces in Orange County and Los Angeles are jumping on their lease renewals early. Research shows that office tenants that are occupying at least 75,000 square feet of properties featuring commercial leases are renewing their leases 22 months ahead of time on average.

This trend has been going on since 2012. By renewing their leases 22 months early, tenants can make the most expedient economic decisions for themselves and weigh increasing rents. They usually need a lot of lead time for finding new locations if their current spaces' physical attributes or economics no longer work for them. In addition, if tenants need large blocks, this can be hard to find or take landlords a while to assemble.

Real estate litigation may stem from hiding property defects

When it comes to selling properties in Los Angeles, sellers are legally obligated to disclose possible problems to prospective buyers that may impact the properties' value. Also, it is not legal to purposely hide major property defects. If a seller fails to share with potential buyers any major problems that his or her property has, this is grounds for real estate litigation.

As a general rule of thumb, property owners must make disclosures only for those problems of which they are aware. This means that they generally do not need to have professionals inspect their properties before they sell them. However, hiring a professional can be helpful in that the seller may learn about a problem and then quickly fix it before putting his or her property on the market. This will help him or her to avoid potentially losing a good buyer to a problem that the buyer may discover when he or she hires his or her own inspector to examine the property for issues.

Los Angeles retail properties with commercial leases promising

The California e-commerce industry has apparently been on an upswing in the Los Angeles area. However, it is clear from the area's retail vacancies that brick-and-mortar shops are still strong contenders. This is great news for those interested in purchasing buildings featuring commercial leases for retail business owners.

The figure for Los Angeles County retail vacancies during 2018's second quarter is 4 percent. This is a slight jump from last year, when the figure for vacancies rested at 3.9 percent. On top of this, the current year's figure is far smaller than the vacancy rate of 5.9 percent seen back in 2009.

Investing in commercial leases is unlike residential investing

When people in Los Angeles think about real estate investing, they often lump residential property investing with investing in non-residential properties. However, the two are quite different. Here is a look at the difference between investing in a single-family residence, or SFR, and a property featuring commercial leases.

Unlike investing in SFRs, investing in commercial properties focuses on acquiring, developing, leasing and operating a variety of types of property. These property types include apartments as well as retail, office, hospitality and industrial properties. Still other commercial property types include senior living, self-storage and student housing.

Properties featuring commercial leases see price gains

The growth of the prices of nonresidential properties in the United States, including Los Angeles and other parts of California, appears to have cooled off during the summer. However, some sectors of the commercial real estate market continue to experience quick sales price gains in spite of already being at record price levels. This may be welcome news for those interested in selling properties featuring commercial leases.

Of all of the types of commercial assets, apartments experienced the largest monthly gains of a little more than 1 percent in July. In addition, they experienced the greatest year-over-year increases of 12 percent. Retail additionally saw a price increase of nearly 2 percent.

Negotiating fair lease terms as a risk management strategy

California business owners understand that unexpected complications can lead to both legal issues and financial losses. In some cases, the impact can be significant, and business owners see the importance of effective risk management and reducing the chance of problems. One practical way to avoid certain types of problems is to strategically negotiate the terms of any commercial lease. 

Contract negotiation is a crucial aspect of protecting the best interests of your company, and you can do this with the terms of a lease as well. While landlords are not always willing to negotiate the terms of a lease contract, businesses find it prudent to ensure they take effective measures in order to ensure they do not face unnecessary exposure to various risks. The terms of your commercial lease could impact your company for years to come.

Commercial leases will soon be available at Anthem's tower

Anthem Inc. is planning to depart from its Los Angeles Warner Center offices in 2019 for a new space nearby. That means a large building will soon be available for lease. In fact, it will be among the largest empty buildings featuring commercial leases in the City of Angels.

The 450-square-foot tower, which stands 14 stories tall, has housed the health insurance company for around 40 years. Its large size makes it seven times the size of the White House. In addition, the 25 acres surrounding the building could be developed in the future.

Market for properties featuring commercial leases remains strong

The economy is currently growing and is continuing to stabilize. As a result, those who buy properties featuring commercial leases are expected to fare well. Sellers of commercial real estate in Los Angeles and elsewhere should likewise thrive in the current commercial real estate market.

Interest rates have a lot to do with the success that many commercial real estate buyers and sellers are experiencing today. With today's lower rates, buyers are paying lower monthly payments. This means they can more easily purchase more property. At the same time, having lower interest rates means that buyers can pay more, which is good news for sellers. In addition, the economy continues to grow, thanks to today's low unemployment.

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