Western Real Estate Business

AUG 2018

Western Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in the Western United States.

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M A R K E T H I G H L I G H T: L O S A N G E L E S www.REBusinessOnline.com Western Real Estate Business • August 2018 • 27 LA CONTINUES TO BREED RENTERS Los Angeles' total multifamily transactional vol- ume exceeded $8 billion in 2017. This was slightly less than what we experienced in 2016, highlighting the incredible amount of investor interest and capi- tal pursuing multifamily investment in the Los An- geles market. Average prices per unit have reached a record of $250,000. Prices have continued to esca- late year over year, with average cap rates hover- ing near a low of 4 percent. A fundamental cause for the continuous investment in multifamily is the sheer demand from renters. Roughly 52 percent of households in Los Angeles rent, the highest rate in the United States. This demand has led to continu- ously declining vacancies, now at a historic low of 3.8 percent, and steady rent growth of near 4 per- cent per year, according to CoStar. The fundamental strength of multifamily in Los Angeles, coupled with the creation of vibrant neigh- borhoods in numerous submarkets, has given the impetus to a development boom. Formerly abandoned historic buildings and park- ing lots in Downtown LA have given way to sky- line-changing residential development sparked, in part, by foreign investment. Examples include the $1 billion Oceanwide Plaza by Chinese firm Ocean- wide and Canadian developer Onni Group's 730- unit Hope+Flower project. Hollywood, which was once the epicenter of the region's culture and entertainment scene, has been reimagined as a premier residential neighborhood. This submarket now boasts new high-rise, luxury developments like Related Company's 118-unit The Argyle pushing the envelope for the area. The San Fernando Valley, once a first-tier subur- ban neighborhood, has seen a push toward higher density. It is now known for mixed-use projects like the 25-acre NoHo West and a 297-unit Camden Se- curities project with a ground-floor Whole Foods Market, which is aiding the transformation of the rapidly urbanizing region. Developers are also building multifamily at a rapid pace farther West in areas like Culver City and Playa Vista. This is due to the influx of numerous technol- ogy companies in the aptly named Silicon Beach. Overall, there have been about 6,000 units deliv- ered in 2017 with another 30,000 expected before the end of the decade, CoStar notes. Despite considerable strength in the multifamily sector, regulatory challenges remain for develop- ers and investors. Local planning is still a byzantine process, and the litigious climate driven by strong anti-development sentiment has stalled many de- velopments. There has been trepidation in the capi- tal markets to get involved in new construction projects. The potential of the state-wide repeal of Costa Hawkins, which limits rent control, has also prompted fear among investors and led to capital flows moving out of state. Still, multifamily investment remains favorable even as markets continue to mature and scale back on the blistering growth of this cycle. Supply re- mains constricted, and the region's low unemploy- ment rate of 4.5 percent continues to support apart- ment demand. With the 2028 Olympics headed to Los Angeles, public infrastructure and development will continue to expand, shifting the landscape of Los Angeles and inviting continued capital into the market. Joshua Ross Senior Vice President of Investments, Marcus & Millichap Source: Camden Securities Lankershim+Otsego is a 297-unit Camden Securities project with a ground-floor Whole Foods Market that will soon call North Hollywood home. An exorbitant tax assessment on his office complex put a huge dent in his day. He called APTC. An hour later he was relaxing with his baby. For over 20 years, APTC member law firms have handled client real estate portfolios from assessment review through the highest courts. Our members provide national representation with local experience all across the U.S. and Canada. Contact us at 1-844-227-0407 or www.APTCNET.com. Smart, Aggressive Property Tax Advocacy Professional Model

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