Beyond Silicon Beach

The sharp rise in California real estate prices over the last few years has led some commercial real estate investors to wonder if the opportunity to buy into the market has already passed them by. Rapid job growth in the Bay Area, coupled with limited appetite for expanding building permits has led housing prices to rise to historic levels.

The climb has been so dramatic that it has even driven price increases in places like Los Angeles, where many Silicon Valley pioneers have relocated in search of more affordable housing. But with rents beginning to top out in the traditional hot spots, is the party over for California real estate investors?

Not necessarily. While Los Angeles, San Francisco, and other hubs may be showing signs of plateauing, savvy investors can still find plenty of places to invest in the Golden State. Orange County, for example, is expected to experience continued growth in real estate prices this year as the employment market continues to improve. Meanwhile, construction permitting in Orange County remains robust, with construction continuing to climb for the seventh straight year.

In fact, falling unemployment and a more competitive job market are expected to raise housing prices throughout Southern California in 2017. These gains will likely be fairly modest, generating single-digit returns for the year. But these markets should at the very least present investors with a relatively safe spot to park their money in what may prove to be a tumultuous year for other asset classes.

While California real estate may not see the record growth it has experienced in the last few years, there are still plenty of markets within the state that sill provide steady, low-risk returns for years to come. Even more mature markets such as San Francisco and Los Angeles continue to demonstrate remarkably little slack, suggesting that they will remain strong for the foreseeable future.

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