Downtown Los Angeles is getting a lot of attention of late because of the many major commercial real estate improvements taking place in that area, but the Westside continues to be the strongest market in the metro area.
I recently attended the Connect Westside Los Angeles conference in Beverly Hills and found that developers in the area aren’t just resting on their laurels, though. There is plenty of exciting activity in this submarket across various product types.
In the LA multifamily market right now there is heightened attention to luxury and increasing efforts to develop more condos and apartments due to owner/tenant and investor demand.
One project I learned about was One Beverly Hills, which is going into the former longtime Robinson’s-May department store site. Initial plans had the redevelopment of the property strictly as a condo project. The Wanda Group, a China-based developer, is instead turning it into a mixed-use complex that will marry condos with a luxury hotel. This way, the owners of the upscale condos will get amenities provided by the hospitality component, such as easy access to its restaurants and fitness facilities, as well as concierge and in-room dining services.
Over in Santa Monica, The Athens Group is doing something similar with its Fairmont Santa Monica project. A former Sheraton, the redevelopment of the hotel will include condos as well. Athens has similar plans to Wanda’s, with the goal of attracting empty nesters and Millennials to the condos. Both demographics want to have access to amenities directly near where their residences are without having to travel by car.
Speaking of Millennials, they are also transforming the Westside office market. Locales such as Playa Vista are attracting several tech tenants. This creates major creative-office space in this area of the market. However, there is very little room for development. Now office landlords are moving toward El Segundo and other southern locales to redevelop existing class B office space. Several mixed-use communities are also being built in the area to give people the feel of live/work/play environments.
Finally, the capital markets situation is going well throughout the area. There are a lot of financing opportunities for projects, especially multifamily. CMBS lending is up this year and should continue its trends, and lenders seem to be more willing to commit to commercial real estate than ever, especially in this market.
Cautious optimism is a cliché, but that’s what we are seeing. The market is strong, and the rise of interest rates gives investors pause. It will be a breakthrough year for commercial real estate…we just have to see which way it turns.