Condos Conquer Los Angeles
New condominiums are sprouting in downtown Los Angeles at the fastest pace since the 2008 crash, in a sign that a city synonymous with sprawl is embracing dense urban living.
Almost 2,000 new luxury condos are under development or being sold on or ahead of schedule, according to brokers, developers and other market participants. Many are going for over $1,000 a square foot.
Condo resale prices, meanwhile, are up 3.3% in the past year to $628 a square foot in downtown L.A., according to Polaris Pacific, a San Francisco-based real-estate sales and marketing firm.
By comparison, resale prices for all condos in L.A. County were flat during the same period, Polaris said.
“Developers who have gone out and done deals have done very well,” said Paul Zeger, a Polaris partner.
Chinese developers are among the busiest in downtown L.A. They include a subsidiary of Greenland Group, which is building a $1 billion cluster of towers named Metropolis, and Oceanwide Holdings , which plans to complete a complex in 2019 that will include 504 condos, a Park Hyatt hotel and more than 166,000 square feet of retail.
Downtown L.A. once was a financial district that largely emptied out at night. It has been enjoying a broader development surge over the past few years with a mushrooming of stores, restaurants and bars. The Wilshire Grand Center, a 73-story skyscraper with a 900-room InterContinental hotel, is scheduled to open later this year, becoming the tallest building west of the Mississippi River.
But almost all of the residential development since the 2008 downturn has been rental projects, not condos. In all, the number of rental units in downtown L.A. has swelled to 20,361 from 14,365 in 2012, according to CoStar, while asking rents rose to $2.71 a month a square foot from $2.14.
Condo developers had been reluctant to make a postcrash bet on the willingness of Los Angelinos to buy boxes in the sky for the same price they could land a house with a yard and swimming pool.
Only recently, as developers saw downtown become more of 24-hour community, did they make their move.
“The [rental] apartment guys proved there was a market for people who want to live there,” said Arden Hearing, managing director of Trumark Urban, which recently opened a 25-story condo tower with 151 units in downtown L.A. Trumark already has sold 100 units in the project, named TEN50, at prices ranging from $600,000 to $4 million, putting the project ahead of schedule, Mr. Hearing said.
When the firm bought the site in 2014, the entire block consisted of parking lots and a mannequin sales center, he said.
“Flash forward to today: You have almost 1,000 people living on that same block,” Mr. Hearing said.
Fawaz Gailani, a retired oncologist, sold his house on 1.3 acres in Riverside, Calif., to buy a $1.6 million unit on the 17th floor of TEN50. He said he likes the quick access to food, entertainment and other amenities. “You don’t need a car at all,” he said. “That’s the beauty.”
Greenland is set to open the first of Metropolis’s three towers later this year and is already in contract for 80% of its 308 units, at prices averaging over $1,000 a square foot, according to Cory Weiss, an executive vice president at Douglas Elliman Development Marketing, the project’s sales agent.
Roughly 30% of the units in the second tower, which is scheduled to open in 2018, are in contract, Mr. Weiss said. Buyers include foreign investors and existing L.A. residents who like the lifestyle and are getting increasingly frustrated with the city’s traffic, he said.
Brokers and developers believe Chinese buyers will help fuel demand for downtown L.A. condos, just as they have in cities like New York and Vancouver, British Columbia “The connection between Chinese investors and the U.S. real-estate market is certainly a strong one,” said Thomas Feng, Oceanwide Plaza’s chief executive, in an email.
The roots of the city’s downtown renaissance go back to the development of the Staples Center in 1999 and the L.A. Live entertainment complex in 2007. There was a surge of condo and rental development before the downturn, but disappointing condo sales at several high-profile projects discouraged developers from returning to the market.
Instead, rental apartment developers snapped up many of the sites that had been assembled for condo development.
But new rental units are now being delivered at such a fast pace that developers are being forced to offer more incentives and even cut rents in some cases, according to brokers. Average rents are down 4% compared with this time last year, according to Polaris.
“Everything went rental for a while and not enough condo product was built to meet market demand,” said Miles Garber, head of research for Polaris Pacific. “The pendulum swung too far.”
Corrections & Amplifications
The planned development by Oceanwide Holdings in downtown Los Angeles will include more than 166,000 square feet of retail space on two floors. An earlier version of this story incorrectly said the project would include seven floors of retail.