For Los Angeles Apartment Building Owners and Investors
The multifamily market in Los Angeles remains a key sector for investors and building owners. Summer Sales 2024 data highlights market activity across various neighborhoods, providing valuable insights into trends, pricing, and unit distribution. This analysis focuses on key performance metrics such as total sales price, price per unit, price per square foot, and the number of units sold across neighborhoods.
Download the Summer Sales 2024 Comprehensive Market Analysis Report
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Highlights:
1. Market Softening Amid New Developments
Los Angeles' multifamily market continues to expand, albeit at a slower pace. By Q3 2023, vacancy rates rose slightly to 4.2%, driven by a wave of new developments that outpaced absorption. Despite this, asking rents saw only a slight dip, maintaining a strong year-over-year increase of 3.5%. (Kidder Mathews) (NorthMarq).
2. High Property Values in Core Areas
Prime areas such as Santa Monica and Beverly Hills continue to demand premium prices, with the average price per unit exceeding $400,000. These areas benefit from strong rental demand, high desirability, and limited inventory, making them attractive for long-term investors. However, less expensive markets like Inglewood and Koreatown may offer more attractive cap rates, signaling strong returns on investment despite lower unit prices (J.P. Morgan | Official Website)(Transwestern).
3. Sales Activity Decline
Multifamily sales activity has slowed significantly, with transaction volumes down more than 50% compared to 2022. Median sales prices hovered around $283,400 per unit, and cap rates averaged approximately 5%. This reflects cautious investor sentiment amid rising interest rates and a challenging economic climate (Kidder Mathews) (NorthMarq).
Top Sales Activity:
- Total Number of Properties Sold by Neighborhood
Area Insights:
1. High-End Coastal Markets: Santa Monica and Redondo Beach
- Santa Monica: Leading the charge in both Total Sales Price and Average Price Per Unit (PPU), Santa Monica represents one of the most sought-after areas in Los Angeles County for investors. With 26 properties sold, generating $136.4 million in total sales, Santa Monica commands some of the highest real estate prices. This can be attributed to its prime coastal location, world-class amenities, and affluence.
- Investor Insights: Santa Monica’s high pricing—an Avg PPU of $396,379 and an Avg PSQFT of $415.45—indicates that it is a market reserved for investors with significant capital who are seeking long-term value retention and appreciation. The area's appeal to luxury buyers and renters ensures steady demand, making it a relatively stable and lucrative investment despite high entry costs.
- Redondo Beach: Similarly, Redondo Beach, though smaller in the number of properties sold (14 properties and 113 units), shows high market value with an Avg PPU of $491,741 and Avg PSQFT of $498.40. This indicates that Redondo Beach is a premium market where investors are willing to pay significantly higher prices per unit and per square foot for the benefits of a coastal location and a well-established community.
- Investor Insights: For investors looking for more boutique investment opportunities, Redondo Beach represents a premium yet less competitive alternative to Santa Monica. The high prices reflect strong demand and the limited availability of properties in this beach community. Investors should expect robust rental income streams and long-term appreciation.
2. Balanced Market with Growth Potential: Long Beach
- Long Beach: This market stands out as a balanced opportunity for investors. While not reaching the same pricing heights as Santa Monica or Redondo Beach, Long Beach provides a compelling mix of affordability and growth. With 29 properties sold (the same as South Los Angeles) but a significantly higher Total Sales Amount of $61.1 million, Long Beach has a healthy demand, driven by its evolving downtown, waterfront, and urban revitalization efforts.
- Investor Insights: Long Beach’s Avg PPU of $303,578 and Avg PSQFT of $389.78 place it in a sweet spot for investors who are looking for strong upside potential without the extreme costs of higher-end markets. It’s an attractive option for investors focused on achieving a balance between reasonable entry costs and steady returns, particularly as Long Beach continues to attract both commercial and residential development.
3. Affordable Investment Opportunities: South Los Angeles
- South Los Angeles: Representing a more cost-effective investment opportunity, South LA has the highest number of properties sold (29), matching Long Beach, but with a lower Total Sales Amount of $28.2 million. This results in the lowest Avg PPU of $204,748 and Avg PSQFT of $253.84 among the highlighted neighborhoods. South LA’s affordability is reflective of its ongoing transformation, with a growing focus on development and gentrification.
- Investor Insights: Investors looking for value-add opportunities will find South LA appealing due to its lower entry costs and higher potential for future appreciation. The lower prices per unit and square foot suggest that there is room for significant improvements and growth. As new infrastructure and development projects take hold, the area’s real estate market could experience appreciation, making it an ideal target for investors focused on long-term gains through renovation, redevelopment, or community enhancements.
4. Central LA Appeal: Mid-City
- Mid-City: With 11 properties sold and 98 units, Mid-City represents a central Los Angeles neighborhood that provides a balance between affordability and proximity to major urban hubs. The Avg PPU of $345,133 and Avg PSQFT of $349.97 reflect a mid-tier market, offering a more affordable alternative to premium Westside neighborhoods while maintaining accessibility to downtown and other key areas.
- Investor Insights: Mid-City offers investors a chance to tap into a stable central market that benefits from strong demand due to its location. With moderate prices compared to Westside or coastal neighborhoods, Mid-City remains an attractive option for investors looking for consistent rental demand and steady appreciation over time. Its proximity to business districts, retail, and transportation hubs enhances its long-term value proposition.
5. Diverse Investment Opportunities Across Los Angeles
- Beyond the well-known premium markets like Santa Monica and Redondo Beach, a vast number of neighborhoods across Los Angeles contribute significantly to the multifamily real estate market. With 235 properties sold and 4,245 units generating over $1 billion in total sales, these diverse areas collectively offer substantial opportunities for investors. These neighborhoods represent a broad spectrum of the Los Angeles landscape, each with its own unique appeal, ranging from up-and-coming urban pockets to established suburban communities.
- Investor Insights: The diversity of these markets highlights the wealth of opportunities available across the city, offering attractive options for investors willing to explore areas beyond the traditional hotspots. Many of these neighborhoods provide strong growth potential and higher yields, particularly as they continue to develop and attract new residents. This demonstrates the importance of looking across the entire Los Angeles market, where emerging neighborhoods can offer competitive returns and long-term investment potential.
Top Metrics By Neighborhood
- Top Neighborhoods: By Total Sales Price:
Santa Monica and Downtown LA see consistently high sales values due to their prime locations, coastal appeal, and strong local economies. Santa Monica benefits from its proximity to the beach and its status as a desirable area for high-income residents, including tech professionals and entertainment executives. Meanwhile, Downtown LA's booming development, especially in multifamily properties, makes it a hotspot for large-scale transactions. Additionally, significant infrastructure projects, such as new luxury mixed-use developments, continue to attract investment to these neighborhoods (Matthews™) (Norada Real Estate Investments).
- Top Neighborhoods: By Average Price Per Unit:
The neighborhoods of Arcadia, Beverlywood, and La Cañada Flintridge rank highest in Los Angeles County for average price per unit, each exceeding $600,000. Arcadia leads at $695,000 per unit, driven by its affluent suburban environment, excellent schools, and appeal to international buyers. Beverlywood follows at $656,250 per unit, benefiting from its prime Westside location, family-friendly atmosphere, and proximity to Beverly Hills. La Cañada Flintridge rounds out the top three with an average price of $615,774 per unit, supported by its exclusive community, top-rated schools, and spacious properties nestled in the foothills (Matthews™) (Norada Real Estate Investments) (The Real Deal).
3. Top Neighborhoods: By Total Number of Units Sold
Downtown LA consistently leads in the number of units sold, driven by its rapid development of high-density residential projects. Santa Monica, despite being a smaller market, also records a high volume of unit sales due to its popularity with affluent buyers and investors looking to capitalize on the area's stable rental demand (Norada Real Estate Investments) (The Real Deal).
Strategic Insights and Action Items for Apartment Building Owners and Investors
Investors and apartment building owners have a variety of opportunities across Los Angeles, from established prime markets to emerging neighborhoods with potential for growth.
Explore Value-Add Opportunities in Emerging Markets
Investors should look beyond premium markets like Santa Monica and Venice and consider value-add opportunities in emerging neighborhoods such as Koreatown, Inglewood, and North Hollywood. These areas offer relatively lower entry prices while still delivering strong rental growth and robust sales volumes. Urbanization and gentrification trends are driving demand in these locations, making them ideal for repositioning properties to enhance returns. By investing in renovations and improving property management, investors can capitalize on rising values and increased rental demand (Norada Real Estate Investments) (The Real Deal).
Maximize Value in Premium Markets
Coastal and high-density urban markets like Santa Monica, Venice, and Downtown LA continue to dominate the market in terms of total sales and property values. Investors in these areas should focus on maintaining the premium nature of their assets by investing in renovations, upgrading amenities, and enhancing the overall tenant experience. These top-tier neighborhoods are likely to retain high demand due to their desirability, location, and limited housing supply. Improvements that justify premium pricing per square foot can help owners maintain a competitive edge despite increased development (Matthews™) (The Real Deal).
Capitalize on Stable Rental Markets
Despite a softening sales market, rental prices remain stable across much of Los Angeles, particularly in high-demand neighborhoods like Westwood and Santa Monica. Investors can leverage this rental stability by holding on to properties in key areas with low vacancy rates, allowing them to continue benefiting from consistent rental income. Strategic rent adjustments can further maintain competitiveness and maximize returns. For those in established markets, focusing on stable, long-term returns through effective property management is key to sustaining profitability (The Real Deal) (Matthews™).
Consider a More Long-Term View
While cap rates may be lower in prime markets like Santa Monica and Venice, investors seeking higher cash flow might explore properties in Koreatown and Greater Inglewood, where cap rates are more attractive and initial returns can be stronger. These emerging markets, though less expensive to enter, offer significant potential for appreciation as urban development spreads. Investors looking for a balance between cash flow and long-term appreciation should carefully evaluate these neighborhoods to find properties that align with their investment strategy (Matthews™) (Norada Real Estate Investments).
Download the Summer Sales 2024 Comprehensive Market Analysis Report