Commercial Real Estate
News & Analysis

Cedars-Sinai Acquires Beverly Connection for $270 Million

The biggest LA deal of the week was Cedars-Sinai Health System's $270 million acquisition of the Beverly Connection, a 341,000-square-foot retail complex at the corner of La Cienega and Beverly Boulevards. The sale, from Ashkenazy Acquisition Corporation, works out to approximately $790 per square foot — a premium that reflects the property's strategic location adjacent to the hospital's main campus.

While Cedars-Sinai has not announced specific redevelopment plans, the acquisition signals a continued trend of healthcare and institutional buyers acquiring well-located commercial properties in LA's Westside corridor. For retail investors, the deal underscores that prime LA locations still command significant valuations even as the broader retail sector faces headwinds. LA retail vacancy stood at 5.6% as of Q4 2025, according to Kidder Mathews, one of the tightest vacancy rates among major metros.

All Eyes on the Fed: Rates Expected to Hold at 3.50%–3.75%

The Federal Reserve's Federal Open Market Committee convenes on March 17–18 for its latest policy meeting, and the consensus is clear: rates are expected to hold at their current 3.50%–3.75% range. While the market has been anticipating further easing after cuts in late 2024, the Fed has signaled a patient approach amid persistent inflation and trade policy uncertainty.

Wall Street forecasts are diverging on the timeline for the next cut. Goldman Sachs recently pushed its rate-cut forecast to September and December of 2026 — a more conservative outlook than earlier projections. Barclays expects just one cut for all of 2026. The 10-Year Treasury yield sat at approximately 4.27% as of March 12, a level that continues to keep commercial mortgage rates elevated.

For CRE borrowers, the current lending landscape remains challenging. Commercial loan rates range from 4.99% to 12.75% depending on property type, leverage, and borrower profile. Investors looking to refinance or acquire should be underwriting with the assumption that rates will remain in this range through at least mid-year.

Tariffs Drive Construction Costs Higher

On the cost side, newly imposed tariffs are adding fresh pressure to an already strained construction environment. According to the Associated General Contractors of America, nonresidential construction input prices rose 2.9% year-over-year through early 2026, with steel and aluminum costs climbing sharply in response to tariff policies.

In a significant legal development, the Supreme Court recently invalidated several major tariff policies, a ruling that could ease cost pressures in the coming months if import duties are rolled back. For developers and property owners planning renovations or ground-up projects in the LA market, the next few months will be critical for locking in material costs and assessing project feasibility.

Developer Sentiment Rises: Allen Matkins/UCLA Survey

Despite macroeconomic uncertainty, California's commercial real estate executives are growing more bullish. The Allen Matkins/UCLA Anderson Forecast Winter 2026 survey found that more than 60% of CRE executives are more optimistic about development prospects over the next three years compared to last year.

The optimism is particularly strong in the industrial and multifamily sectors, where developers cite population growth, the AI-driven demand for data centers and logistics space, and Southern California's persistent housing shortage as tailwinds. Office sentiment, while still cautious, has improved from the lows of 2024, with respondents noting that trophy and Class A properties in prime locations are stabilizing.

This is consistent with the broader narrative we've been tracking: capital is returning to CRE, but it's selective. Investors and developers are favoring assets with strong fundamentals in supply-constrained markets — exactly the type of properties that define the Los Angeles landscape.

What This Means for LA Investors

This week's developments paint a picture of a market in transition. Institutional and healthcare capital is flowing into prime LA real estate at strong valuations. Interest rates appear locked in through at least mid-2026, meaning current pricing dynamics are likely to persist. Construction costs remain elevated but may find relief from shifting trade policies. And on the ground, the professionals closest to the market are signaling renewed confidence.

At First Capital Investment Realty, we continue to advise our clients on how to navigate these conditions — whether that means identifying acquisition opportunities in a rate-hold environment, evaluating the impact of rising costs on development projects, or positioning assets for long-term value creation. If you're an investor or property owner in the LA market and want to discuss how these trends affect your portfolio, reach out to our team for a consultation.

Two Crises, One Solution

Los Angeles faces a paradox that has defined its real estate market for years: a severe housing shortage alongside 50 million square feet of vacant office space. According to Cushman & Wakefield's Greater Los Angeles Office Report, office vacancy stands at roughly 23% — a record high. Meanwhile, the city continues to struggle to meet state-mandated housing production targets.

The Citywide Adaptive Reuse Ordinance (ARO), which went into effect February 1, 2026, is designed to address both problems simultaneously by streamlining the conversion of underutilized commercial buildings into multifamily housing.

What the New Ordinance Allows

The updated ARO is a significant expansion of the original 1999 ordinance that helped spark downtown LA's residential revival. According to an analysis by JD Supra, the key changes include:

• Citywide eligibility: The ordinance now applies across all of Los Angeles, not just specific designated areas like the original.
• Lower age threshold: Buildings as young as 15 years old qualify for as-of-right conversion. Buildings 5–15 years old can qualify through a streamlined administrative review.
• Broader building types: Office buildings, industrial properties, retail stores, and even parking garages are all eligible for conversion to housing.
• No minimum unit sizes: Developers are exempt from minimum unit size requirements, enabling creative and flexible floor plans.
• Streamlined approvals: Most qualifying projects can go directly to building permits without lengthy City Council review.

Developers Are Already Moving

The response has been swift. As the Los Angeles Times reported, developer Garrett Lee has already begun converting a gleaming downtown office high-rise into nearly 700 apartments. David Tedesco of IMT Residential is moving forward with plans to transform the former Sunkist Growers headquarters in Sherman Oaks into 95 apartments — a neighborhood that was never included in the prior ordinance.

"This is monumental for the city," Lee told the Times. He plans to use terms in the new ordinance that allow him to put more apartments on each floor of his projects.

The Original ARO Produced Over 12,000 Units

The precedent is encouraging. The 1999 adaptive reuse ordinance, which was primarily limited to older downtown buildings, helped produce more than 12,000 housing units and is widely credited with transforming downtown Los Angeles from a daytime-only commercial district into a vibrant residential neighborhood. The LA Business Journal reports that since 2016, LA has seen 5 million square feet of office space converted or demolished, with an additional 4 million square feet planned or in the pipeline.

What This Means for Commercial Property Owners

For owners of underperforming office, retail, or industrial buildings in Los Angeles, the new ARO presents a significant opportunity. Buildings that have struggled with high vacancy and declining rents now have a clear regulatory pathway to residential conversion — potentially unlocking substantial value. Key advantages include retaining existing floor area and building height even if they exceed current zoning, locking parking at existing levels with surplus spaces convertible to units or amenities, and the ability to add interior courtyards and light wells without floor area penalties.

At First Capital Investment Realty, we're advising clients on how this policy shift may affect property valuations and investment strategies across the LA market. If you own commercial property and want to explore your options, contact our team for a complimentary analysis.

The Numbers Tell a Clear Story

Commercial real estate sales volume in the LA metro reached $37.3 billion by the end of 2025, up from $33 billion in 2024 and $35 billion in 2023, according to data from MSCI, reported by Bisnow. While still below the $51.4 billion pre-pandemic peak of 2019, the trajectory is unmistakably positive.

"It was a better year for all CRE participants in that the market really stopped sliding in 2025," said Sean Fulp, Vice Chair and Head of Office Capital Markets for the Southwest U.S. at Colliers.

Private Capital Is the Dominant Buyer

One of the most notable trends is the dominance of private capital, which accounted for 61.4% of all LA-area buyers in 2025 — the highest share in a decade. Private investors are net buyers, making up only 51.2% of sellers. Meanwhile, institutional buyers held at 23.8%, taking a more cautious approach.

"Until people see a good track record of a couple years of good returns, they just don't want to allocate more," explained Jim Costello, Research Executive Director at MSCI. Institutions are waiting for others to prove the returns before diving in, creating a window for nimble private investors.

Owner-Users Are Buying at Elevated Rates

A striking development in 2025 was the surge in owner-user purchases. About 10.4% of all CRE buyers were owner-users, up from 8.8% in 2024. In the office sector, JLL estimates that 23% of LA office sales went to owner-users — a phenomenon that has only intensified in 2026. JLL's Jeffrey Bramson noted he is currently working on three owner-user office sales in LA totaling $400 million in capitalization.

The most high-profile owner-user deal of 2025 was Riot Games' $150 million purchase of Element LA from Hudson Pacific Properties, paired with an $81 million lease termination — a move that underscored the "own, don't rent" mentality taking hold among major companies.

Industrial and Leasing Activity Recovering

Industrial leasing activity reached approximately 33.3 million square feet in 2025, up from 29.7 million SF in 2024 and 24.3 million SF in 2023. According to the LA Business Journal, citing Avison Young data, overall LA real estate sales increased 11.1% in deal count and 21.8% in dollar volume year-over-year.

Multifamily led by asset type with 557 transactions totaling $6.5 billion — a 30.8% increase in dollar volume. Land sales more than tripled, surging nearly 157% as larger, more significant sites began trading again.

What's Driving the Recovery

Several factors are fueling the rebound:

• Interest rate decreases in 2025 improved financing conditions and buyer appetite.
• Expectation resets: Buyers and sellers have recalibrated values, creating a more functional transaction market.
• Below-peak pricing: Investors see an opportunity to acquire assets at discounts to pandemic-era peaks, particularly in industrial and office.
• Positive net absorption returning in industrial submarkets for the first time since 2022.

As Brett Dedeaux, CEO of Dedeaux Properties, put it: "We believe 2026 will mark a transition from reset to recovery — not a return to speculative excess, but a more rational, user-driven market."

Implications for LA Investors

The data paints a picture of a market that has found its footing. For property owners considering a sale, the improving volume and expanding buyer pool suggest stronger deal execution. For buyers, the window to acquire at below-peak pricing — especially with reduced institutional competition — may not last indefinitely.

At First Capital Investment Realty, we're tracking these capital market trends daily. Whether you're looking to buy, sell, or understand what your property is worth in today's market, reach out for a complimentary valuation.

LA's Apartment Supply Hits an All-Time High

While most major U.S. markets saw apartment supply peak in 2024 or 2025, Los Angeles is arriving late to the party. According to RealPage Market Analytics, approximately 12,300 apartment units are scheduled for completion across the LA market in calendar year 2026 — the largest delivery load since RealPage began tracking in 2000 and the nation's fifth-largest completion volume.

This represents a significant jump from the roughly 9,000 units completed in 2025, an increase of about 3,400 units — the biggest year-over-year ramp-up of any major U.S. market.

Where the Units Are Landing

The new supply is concentrated in several key submarkets:

• Mid-Wilshire: Leading with approximately 3,000 units — nearly 1,700 more than delivered in 2025
• Hollywood: About 1,400 units, an increase of 889 over the prior year
• Southeast Los Angeles: Roughly 1,370 units
• South Los Angeles: An increase of 568 units over 2025 completions

Context Matters: It's Still a Tight Market

Despite the record-setting headline, the actual impact on LA's massive existing inventory will be modest. With nearly 1.17 million existing apartment units, the 12,300 new completions represent only a 1.1% inventory expansion — well below the national average of 1.6%.

According to Northmarq's latest market analysis, apartment demand in LA reached a three-year high in recent quarters, suggesting the market may be better positioned to absorb this new supply than most analysts expected. CBRE's 2026 outlook projects vacancy stabilizing around 5.5%, with rent growth turning positive as supply deliveries ease by 20% year-over-year nationally.

Rent Growth Is Turning the Corner

After several years of flat or negative rent growth in some submarkets, the outlook is improving. CBRE's 2026 outlook projects that LA multifamily will see positive rent growth, with strong potential in value-add and workforce housing segments. Origin Investments' rent forecast projected 3.0% year-over-year Class A rent growth for Los Angeles by early 2026.

As Erik Edeen, Principal at Avison Young, noted: owning and operating a multifamily building is lucrative right now in LA, especially given that it's about two-and-a-half times more expensive to own than rent in the metro — a ratio that supports continued strong rental demand.

Investment Implications

For multifamily investors in the LA market, the supply peak creates a nuanced landscape:

• Value-add opportunities: Older Class B and C properties in high-demand submarkets may benefit as tenants priced out of new luxury developments seek more affordable options nearby.
• Submarket selection matters: Not all areas are seeing the same supply pressure. Submarkets with limited new construction may see faster rent recovery.
• Post-peak tailwind: With construction starts declining, the supply pipeline will thin significantly in 2027–2028, potentially driving stronger rent growth for well-positioned assets.

At FCIR, we're helping investors identify the right multifamily opportunities in today's market. For a complimentary analysis of any multifamily property in the LA metro, contact our team.

$900 Million in Federal Transit Funding

The financial commitment is real. In 2024, Los Angeles secured nearly $900 million in federal funding to bolster transportation infrastructure ahead of the Games. The breakdown includes:

• $709.9 million for two major Metro projects: the D Line (Purple) Subway Extension connecting downtown to Westwood, and the East San Fernando Valley Light Rail project
• $139 million to reconnect communities divided by highways through bus improvements, mobility hubs, and first/last-mile solutions
• $9.96 million for pedestrian and bicycle infrastructure in East Los Angeles

Senator Alex Padilla emphasized that these investments "will serve Los Angeles County's 11 million residents permanently" — not just during the two weeks of competition.

Major Infrastructure Projects Underway

Beyond transit, the Olympics are catalyzing infrastructure development across the metro:

• LAX modernization: A $14 billion overhaul making the airport a world-class gateway
• Purple Line subway: All three sections expected to open before the 2028 Games, connecting downtown through Beverly Hills to Westwood
• Inglewood corridor: SoFi Stadium (Opening/Closing Ceremonies), Intuit Dome, and surrounding mixed-use developments are transforming the neighborhood
• Downtown LA: Upgrades to the LA Convention Center, Pershing Square, and new hotel construction for media centers and event operations

Neighborhoods to Watch

The real estate impact extends well beyond venue locations. Neighborhoods positioned near new transit lines and event infrastructure are seeing accelerating investment:

• Inglewood: Already experiencing a renaissance driven by SoFi Stadium, Intuit Dome, and transit expansion. Commercial and retail demand is surging.
• Crenshaw Corridor / South LA: The Crenshaw/LAX Metro line is positioning Leimert Park and Baldwin Hills as transit-accessible investment zones.
• Century City to Westwood: The Purple Line extension will dramatically improve accessibility, tightening already-competitive commercial availability.
• Santa Monica / Westside: Expect increased hospitality and short-term rental demand as international visitors, sponsors, and athletes seek beachside accommodations.

Short-Term vs. Long-Term Commercial Impact

Historically, Olympic host cities see distinct phases of real estate impact. In the short term, expect surging Airbnb and vacation rental demand, temporary hotel conversions, and rising rents in event-adjacent neighborhoods. But the long-term effects tend to be more significant — infrastructure improvements make previously overlooked neighborhoods more desirable, commercial development boosts job creation, and increased global visibility drives sustained investment interest.

As LA28 chair Casey Wasserman stated: "We are well positioned to host the greatest games on Earth." For commercial real estate investors, the question isn't whether the Olympics will impact the market — it's whether you're positioned to benefit.

How FCIR Is Helping Clients Prepare

With two years until the opening ceremony, the window for strategic positioning is narrowing. At First Capital Investment Realty, we're helping investors identify properties in Olympic-impacted corridors and evaluate assets that stand to benefit from the infrastructure build-out. Contact us for a market analysis of any commercial property in the LA metro.

The Crisis in Numbers

California's property insurance market is under severe stress. Major insurers have pulled back from issuing new policies, premiums are spiking, and the state's insurer of last resort — the California FAIR Plan — has seen its exposure surge 37% year-over-year, with policies more than doubling in wildfire-prone zones over the past four years. According to Bloomberg, 14% of FAIR Plan policies now cover properties in urban zones with low fire risk — a sign that the crisis has spread well beyond wildfire zones.

For commercial property owners, the impact is direct: higher operating costs, more difficult financing, and in some cases, an inability to obtain adequate coverage at any price.

Why This Matters for CRE

Insurance availability is a fundamental requirement for commercial real estate transactions. Without adequate coverage, lenders won't finance, buyers can't close, and property values decline. The Reuters 2026 CRE analysis identified rising insurance costs as a potential "deal-breaker" in certain California markets. And a legal analysis from WSHB warns that the FAIR Plan's commercial coverage cap of $20 million per location is "far below replacement costs" for many larger properties — leaving buildings structurally underinsured.

New 2026 Laws Offer Some Relief

California has enacted several new laws effective January 1, 2026, aimed at stabilizing the market. According to the California Department of Insurance, the key provisions include:

• Business Insurance Protection Act (SB 547): Extends the existing non-renewal moratorium to commercial policies, covering businesses, HOAs, condominiums, affordable housing, and nonprofits — a significant new protection for commercial property owners.
• FAIR Plan Stability Act (AB 226): Allows the FAIR Plan to access catastrophe bonds and lines of credit, providing additional financial backing for the state's insurer of last resort.
• Wildfire safety grants and discounts: New programs incentivize fire-resistant improvements with expanded insurance discounts and faster claim payouts.

Additionally, SB 1076, introduced in February, would require insurers to offer coverage to any property meeting wildfire-safety standards starting in 2028 — a potential game-changer if passed.

What Commercial Property Owners Should Do Now

The insurance landscape is evolving rapidly. For commercial property owners in the LA market, proactive steps include:

• Review your coverage immediately. Ensure your policy limits reflect current replacement costs, not outdated valuations.
• Invest in fire-resistant improvements. Properties that meet wildfire-safety standards may qualify for better rates and, potentially, guaranteed coverage under pending legislation.
• Budget for higher insurance costs. Factor realistic insurance projections into NOI calculations for acquisitions and refinancing.
• Explore surplus lines and alternative markets. Specialty insurers and excess & surplus lines carriers may offer options when standard markets won't.

At First Capital Investment Realty, we factor insurance costs into every property analysis we conduct. If you're concerned about how the insurance environment is affecting your commercial property's value or marketability, contact our team for guidance.

The Big Picture: Stabilization With Caution

Industry experts are calling 2026 a year of "stabilization and recovery" for commercial real estate. According to CNBC's 2026 outlook, citing research from Cushman & Wakefield and CoStar, the U.S. real estate market is entering the year with "renewed energy, clearer visibility, and increasing optimism in both leasing and capital markets."

A Deloitte survey of 850 global CRE executives found that 83% anticipate revenue growth by year-end 2026, though that's down slightly from 88% last year. Meanwhile, CoStar reports that sales volume surged more than 40% year-over-year in Q3 2025, and banks are "gradually re-entering the commercial real estate lending space."

But the picture is far from uniform. As Lincoln Property Company notes, "extreme distress exists in some sectors, while demand exists in others." The markets thriving in 2026 are those with structural, long-term demand drivers — population migration, technology infrastructure, and essential services — rather than those dependent on pre-pandemic assumptions.

Los Angeles Office: Record Vacancy, But Signs of Life

Los Angeles County's office sector entered 2026 with record-high vacancy. According to Marcus & Millichap's Q1 2026 report, both CBD and suburban vacancy hover around 20%, with availability above 17% across all six of the metro's largest submarkets. The overall county office vacancy stands at a staggering 23.4%.

However, there are emerging bright spots. Class B/C office space saw positive net absorption during each quarter of 2025, suggesting that smaller tenants and service-based businesses are re-entering the market. California logged a record number of high-propensity business applications last year, and Los Angeles County historically captures the most filings in the state — a leading indicator for future leasing activity.

Industrial: Normalized but Still Resilient

LA County's industrial vacancy has climbed to 4.6% — the highest in a decade — according to Cushman & Wakefield's Q4 2025 SoCal report. But context matters: rents remain roughly 48% above pre-pandemic levels, and net absorption turned positive on an annual basis for the first time since 2022.

South Bay industrial assets — particularly in Torrance, El Segundo, Carson, and Gardena — continue to outperform, driven by e-commerce fulfillment, last-mile logistics, aerospace and defense, and port-related demand.

Multifamily: Rents Stabilizing as Supply Peaks

Multifamily has led CRE investment volume since 2015, and CoStar projects that trend will continue, though its share of total volume may dip as investors allocate more capital toward office, retail, and industrial. Rents are stabilizing as a record wave of new supply enters the market nationally.

Where Capital Is Flowing in 2026

The most significant trend of 2026, according to Lincoln Property Company's analysis, is capital reallocation toward sectors with durable demand. Three areas stand out:

• Data centers: AI workloads are growing at 33% compound annual rates, overwhelming existing electrical grids and creating urgent demand for specialized real estate.
• Healthcare/medical office: Outpatient care delivery is a permanent and growing demand driver, with institutional capital flowing into medical office assets.
• Last-mile logistics: E-commerce continues to drive demand for well-located distribution space near population centers.

"Smile-state" metros like Dallas-Fort Worth, South Florida, and Austin attract disproportionate investment, but coastal markets with structural advantages — including parts of greater Los Angeles — remain competitive for the right asset classes.

Risks on the Horizon

Several headwinds deserve attention:

• $875 billion in CRE mortgages mature in 2026, creating refinancing pressure, especially for office assets (Commercial Real Estate News, March 2026).
• California's population challenges persist — over 229,000 residents left for other states in the past year, while immigration into the state fell 65% (DnG Commercial).
• Tariffs are stalling over one-third of California CRE projects, per the Allen Matkins/UCLA Anderson Forecast survey.
• Insurance costs are rising sharply due to climate risk, becoming a potential deal-breaker in certain markets (Reuters).

Regulatory Watch

Two regulatory developments highlighted by Reuters' 2026 CRE analysis are particularly relevant for California:

• Building Performance Standards (BPS): The first compliance cycle ends in 2026, forcing immediate capital investment decisions for energy efficiency upgrades.
• Transit-oriented housing: California's updated law, taking effect mid-2026, will restrict local zoning limitations near major transit corridors — a catalyst for mixed-use and office-to-residential conversions.

What This Means for LA Investors

For commercial property owners and investors in the Los Angeles market, the message in Spring 2026 is nuanced. Industrial and well-located office assets with strong amenities are outperforming. Multifamily remains a volume leader. And the flight to quality — where tenants choose premium, well-amenitized spaces — continues to widen the gap between Class A and commodity assets.

As Cushman & Wakefield's chief economist David Thorpe puts it: "If 2025 tested our resilience, 2026 holds the potential for genuine rewards."

At First Capital Investment Realty, we're tracking these trends daily across our offices in Beverly Hills, West Hills, and Claremont. If you're considering a transaction or want a complimentary valuation of your property, reach out to our team.