June 12, 2019
By Dennis Kaiser
Connect Apartments is coming up next week in Los Angeles. The conference features a host of commercial real estate experts who will cover a wide range of topics including the economy, institutional investment, multifamily finance, development, the housing crisis and how apartment leaders are getting deals done today.
Leading up to the event, Connect Media asked Nick Griffin, Downtown Center BID’s Executive Director, to share his thoughts about the DTLA multifamily market. Check out our latest 3 CRE Q&A to hear about how the market has evolved, considerations investors must weigh today, and what types of properties and amenities DTLA renters favor.
Q: What are some of the overarching trends you see driving the DTLA apartment market as the year progresses?
A: One thing is clear – Downtowners have really embraced high-rise living. This wouldn’t be news in other world-class cities, but hadn’t been proven in Los Angeles before the current wave of development in DTLA. Relatedly, there is an emphasis on high-quality amenities in these high-rise properties. When you have a top-notch gym, co-working and event spaces, lounge, pool and barbeque area all an elevator ride away, it adds an immense amount of value and appeal to the community. Finally, I’d say that the biggest factor driving the market is the lifestyle of Downtown’s neighborhoods. DTLA has become such a vibrant community, with unrivaled arts and culture, dining and nightlife, and professional opportunities, that for a significant segment of the market, it’s really the only game in town, the only place they’d want to live.
Q: How can and should multifamily investors or developers approach their decisions today given the length of the cycle, interest rates and overall economic conditions?
A: What we’ve seen over the past decade – really two decades if you agree with the premise that the great recession wasn’t primarily about the urban market – is that the appeal of urban centers like DTLA are being driven by cultural forces more definitively powerful and longer term in their impact, than market cycles, interest rates, and shorter-term economic trends. That does not mean ignore the economy or market conditions, but consider them in the context of the overarching dynamics, which have to do with people and companies wanting to be in dense and diverse urban centers because it is in their economic and social best interest. I would make the case that if we could effectively address affordability to build housing at all levels of the market, cities have even more growth potential.
Q: What are some examples of the types of properties that people are seeking out in DTLA today? What’s on the horizon?
A: I mentioned the appeal of high-rise living, most of which has been rental over the last decade, but I think that the same forces will drive the condo market in the future. There simply hasn’t been much product, but what has come to market and been properly targeted – such as TrueMark Urban’s Ten50 – have done very well. Right now, we’re watching Perla on Broadway, which is being developed by SCG America and is significantly larger, but equally well-targeted and seems to be doing quite well. If that project performs, you can expect more like it because there is pent-up demand to own in a market that has been very appealing to renters, many of whom have now been here long enough to know they want to stay. We also see opportunity for both smaller and larger units. Smaller – even micro – to serve the needs and preferences of young city-dwellers who value location, lifestyle and affordability over the size of their apartment. Co-living is another opportunity that addresses this market. On the other side of the spectrum, we see opportunity for larger units for families. DTLA has not historically had a large proportion of families, but as younger folks who love the city age into married life and kids, many are going to want to stay in DTLA. A related product we haven’t seen much of in Downtown or L.A. in general, but which we think has potential, is townhomes. Cities like Brooklyn were built on the 3-5 story brownstone, and more recently have seen new construction versions which are highly appealing to urban families and would be a good fit for DTLA.
For comments, questions or concerns, please contact Dennis Kaiser