West Coast Real Estate Update: June 2016 #2
LACMTA Approves Tax Ballot Measure to Fund $120 Billion Transit Plan
The Los Angeles County Metropolitan Transportation Authority (LACTMA) on June 24, 2016, approved a sales tax ballot measure to help fund $120 billion in rail and road improvements to advance the city’s transit system. The LACMTA board’s approval of the increase in the city’s sales tax to 9.5 percent still needs approval by the Los Angeles County Board of Supervisors before it can be put on the ballot.
The proceeds of the sales tax increase would be used for both a new subway line that runs from the San Fernando Valley to Los Angeles International Airport and new extensions of existing rail lines throughout Los Angeles County. Specifically, some of the newer transit projects expected to be funded by the measure include the Westside subway Purple Line extension to UCLA, the East San Fernando Valley Van Nuys light rail line and the Sepulveda Pass Transit Corridor. The proposed infrastructure projects could lead to increased job growth and transient-oriented development. We will be watching the outcome of the ballot measure closer come November.
What Does the Brexit Mean for Commercial Real Estate?
The immediate results for the markets of the United Kingdom’s referendum on membership in the European Union were not positive. The markets were down, and the 10-year treasury yields fell 25 basis points. Because the actual secession from the EU is months away, the impact of the so-called Brexit will not become clear for some time. It is anticipated that investors will flock to safe havens, including U.S. treasuries. Analysts are predicting that investors and homebuyers can expect low interest rates for longer and a pause on interest rate hikes from the Federal Reserve until at least September. A continued low interest rate environment is anticipated to be a positive for U.S. Real Estate Investment Trusts, unless those REITs have significant UK and European holdings.
Some publications are predicting that the Brexit will be positive for Class A real estate, especially in top markets, because of the certainty that the U.S. provides. London and New York are the world’s two largest office markets. London has been the world’s financial capital for two centuries, but in recent years, its place within the EU played a big role in keeping things that way. The Brexit could lead to a “demand shock” for London’s office market as economic turmoil hits and financial firms move jobs to continental Europe.
Forcing a Tougher Stance on Sustainability
In Spring Valley Lake Association v. City of Victorville, the city’s approvals of a large retail project effectively found there was no extent to which it would be feasible to require the project to generate electricity on-site, whether by solar or other means. In a decision published on June 15, a state court of appeal ruled that the project violated the California Environmental Quality Act (CEQA) and the Planning and Zoning Law in the absence of evidence in the record to support such a finding.