California is a hub for private equity real estate (PERE) deals in North America, as seen in the recently launched Preqin Special Report: Alternative Assets in California. Californian PERE deals have accounted for a fifth, on average, of all US deals over the past five years, so it is unsurprising that there are a wide variety of asset types represented in the thousands of deals completed every year.
Preqin’s Real Estate Online contains detailed information on the 1,920 Californian PERE deals completed since 2012. As shown in the chart above, office assets are the most prominent in terms of both the number of deals (36%) and the aggregate deal value (48%). Interestingly, deals involving industrial properties represent a large proportion of transactions in since 2012, despite accounting for a small proportion of aggregate deal value.
Despite fewer transactions for office properties in 2016 so far compared with 2015, the aggregate deal value has risen. This is due to two of the largest office deals completed in 2016 to date taking place in California, which both involved Blackstone Group. In March 2016, Blackstone Group sold a portfolio of Los Angeles-based office properties to a joint venture between Douglas Emmett and Qatar Investment Authority for $1.34bn, and in July 2016, Blackstone acquired a portfolio of seven West Coast offices from Hines REIT for $1.16bn.
From office to hotel properties, the appetite for investment, acquisition and development of Californian real estate by private real estate firms has been historically strong, and it looks as if this will continue to grow due to a large population and need for prime office space sustaining demand.