Office, apartments and retail property make up bulk of buildings in evacuation zones.
Roughly 12 million square feet of commercial real estate is at risk of damage from the ongoing Los Angeles wildfires, a figure that represents less than 1% of the total business inventory in Los Angeles but isn’t without wide-reaching implications for the nation’s most populous county.
An exclusive CoStar analysis shows that the commercial properties at risk — concentrated in the evacuation zones of the Palisades and Eaton fires — include some 7,300 multifamily units, 7 million square feet of office space, and 3 million square feet of retail space.
Through Wednesday, the combined fires have burned 38,600 acres in Los Angeles County. Some 88,000 people remain under evacuation orders, with another 84,800 under evacuation warnings due to fire risk.
Officials estimate that as many as 12,000 homes, businesses and other structures were destroyed by the fires, including hundreds of commercial properties in the neighborhoods of Pacific Palisades and Altadena. AccuWeather expects total damage and economic loss from the fires to total between $250 billion and $275 billion.
The damages are likely to translate into renewed demand for commercial real estate in other portions of the county, especially apartments, as displaced residents seek immediate space, according to Chad Littell, national director of U.S. capital markets analytics for CoStar, who compiled the data.
“If you’re in surrounding areas and you have good product, you should see a pickup in demand from these evacuation areas,” Littell told CoStar News.
Tale of two fires
The Palisades fire — the largest ongoing one in the area — was 19% contained as of Wednesday and has torched 27,000 acres, primarily affecting the upscale Pacific Palisades and Malibu neighborhoods along the Los Angeles coast.
That fire’s evacuation zone contains 9 million square feet of commercial space across 697 structures. That includes 4,477 multifamily units across 180 structures, every single one of which remains evacuated indefinitely as the fire rages on.
The Palisades zone also includes 3 million square feet of retail space across 276 structures as well as 6 million square feet of office space across 176 structures. The zone also includes 550,000 square feet of industrial space and about 1,000 hotel rooms, according to CoStar. The fire burned much of the neighborhood’s commercial district, leaving some buildings leveled and others standing.
The Eaton fire is currently 45% contained and has burned 14,117 acres. The commercial properties in the Eaton fire evacuation zones are much like those found in other suburban areas, with big-box stores, apartment complexes and residents from a broader range of income levels.
The Eaton fire’s evacuation zone includes 3 million square feet of commercial space across 619 structures, according to CoStar. That includes 2,834 multifamily units across 261 buildings, 1.5 million square feet of retail space across 237 buildings, 280,000 square feet of industrial space across 22 structures, and 1.4 million square feet of office space across 95 structures.
The Kenneth, Hurst and Archer fires are smaller, with no known commercial structures affected.
Tracking demand
Los Angeles’ multifamily, retail and office markets could see a swell in immediate demand as tenants relocating to new apartments, stores and offices spread out to different corners of Los Angeles to find new suitable space, according to Littell.
The number of multifamily units in the fire zones represent roughly the same number of apartments that tenants rented in the market in the past year. “A year’s worth of net absorption could be potentially looking for multifamily space if the evacuation areas continue to spread and tenants are forced to leave,” Littell said.
Some owners are starting to see renewed interest in their properties because of the fires, according to Sandy Sigal, president and CEO of Los Angeles-based Newmark Merrill, a shopping center landlord with more than 50 retail properties in the San Fernando Valley and other areas of Los Angeles outside the evacuation zones.
“I’ve already gotten a number of calls on space that people need at least for temporary staging or for pop-ups, and we’re only a week into it,” Sigal told CoStar News. “That’s going to accelerate and you’re going to see a whole plethora of these three-year, five-year kind of relocation experiments with new concepts.”
Meanwhile, potential damages to offices could lend a much-needed occupancy boost to properties across the region. Los Angeles has suffered from negative demand for years due to remote working trends and retrenchment among key tenant categories like technology and entertainment.
Office landlords like Carolwood LP, the owner of the Aon Center in downtown Los Angeles, are offering free space to businesses and individuals affected by the fires.
Balaciano Group, a multifamily landlord with properties in the San Fernando Valley, is offering discounted rent to fire victims, while fellow local landlord R.W. Selby & Co. is waiving security deposits for fire victims.
Article by Brannon Boswell for CoStar News
Read the original article here.