Notes from the Road - West Coast Apartments and Office

研报英文原文证据摘录

Notes from the Road - West Coast Apartments and Office

leases signed this year, 78% were AI (the deal size increased by 33%), with the Bay

Area and NYC accounting for 73% of the AI leases.

• Lack of space a huge factor driving the rebound. Seattle CBD's rebound is as much

a result of the tightened Bellevue/Redmond submarkets as it is about the AI boom.

DEI's Westside LA and Honolulu submarkets are benefiting similarly as Century City's

dwindling availability and the conversion of two office towers in Honolulu (DEI undertook

the first project) has re-established equilibrium. Private offices are regaining favor. In

apartments, ESS faces the next few years with little competitive supply, which runs up

against the growing enforced RTO many tenants are now taking.

• Streets improving. Having visited the West Coast each year since emerging from

the pandemic in 2021, this is the best Seattle and the Westside of LA have looked.

While there is a push to rid the streets of the homeless, it's unlikely these progressive

regions will ever be without. We can't dismiss the timing our visit with the World Cup

that presumably increased the police presence and that Seattle likely dressed up the

city. That the streets can clean up quickly shows government can improve quality of

life if it wants to. Interestingly, taxes seem to be the biggest fear, as Texas lures more

businesses away, and both California and Washington seek to levy more taxes on the

mere and uber rich alike.

• Bay Area still leading on West Coast, but LA and Seattle awakening. We think it's

likely not until 2027 that the latter two firmly show improvement in market stats, but both

are firmly setting a foundation that 2025 was the trough and now are on the cusp of

upward inflecting.