Downtown Los Angeles on the rise
Real estate trends and investments: Fall 2017
Downtown Los Angeles — DTLA, as we locals call it — continues to be an expanding market for both domestic and international investors. In addition, the city is preparing to host the Olympics in 2028.
Property values all over the downtown area continue to rise, and new condominiums are selling at some of the highest prices in the nation. Development is so busy that Los Angeles now sports the second-highest number of cranes in use in the US. Only Seattle has more construction activity. And we see no end in sight.
The revitalization of downtown Los Angeles continues. The city has experienced an explosion of large, ground-up mixed-use developments. Historical properties are also undergoing renovations to enable their use in the 21st century. Parks have been added, and the riverfront will be upgraded. Residential development is booming, and by the end of the year, four new hotel properties will have come online, including the towering InterContinental Los Angeles Downtown hotel at the Wilshire Grand Center development. The mixed-use trend continues and is flowing out from South Park into other districts.
Sales of office space reached a 10-year high of $9.6 billion in 2016. Class A rents rose 5.1% in 2016 from 2015 and 28.3% over the last 10 years. For the past three years, rents have risen as vacancies have fallen. Class A vacancies hit an 11-year low of 10.2% in 2016. The growth in the downtown Los Angeles real estate market was driven by high‑office‑use industries such as financial services, health care, education and technology.
Condominium sales for two major projects are underway in DTLA. Metropolis’ first residential tower is nearly sold out, and the new Trumark Urban creation TEN50, a 25-story building at the corner of Olive and 11th that was 60% sold as of March 2017, is expected to sell out by the end of 2017. Oceanwide Plaza is building 504 condominium units, with plans to start selling in 2018.
Retail space continues to grow downtown, with more than 415,000 SF of retail proposed as part of new mixed-use developments. Brick-and-mortar establishments have found strong competition from the internet, as younger professionals prefer to order online rather than drive to a store to shop.
The opening of the InterContinental Hotel at the Wilshire Grand Center (889 rooms) is a game-changer. While the addition of the new hotel rooms are welcome, the market may need some time to absorb the new supply in the short-term. And the Convention Center itself needs to expand to be competitive in attracting larger conventions to the city.