December 3, 2019 Comments (0) Views: 318 California News, Los Angeles, Properties

Westside Advice: Go Small or Wait for Next Cycle

By Dennis Kaiser

Los Angeles’ Westside remains on just about every investor or developers “must have” market lists. Yet, that high demand is creating a host of interesting approaches, whether that be smaller units or co-living projects. Madison Realty Capital’s Bradley Ross, one of the speakers at this week’s Connect Westside Los Angeles, shared a few insights on what’s driving today’s market. Check out his thoughts in our latest 3 CRE Q&A.

Ross

Q: What are some of the overarching trends you see driving deals on the Westside?
A:
We have seen a heavy push towards the development of smaller units. Developers are trying to deliver units to renters at an attractive nominal price despite the increased rent they are charging per-square-foot. We are seeing more and more micro-unit and co-living projects taking shape and following this philosophy. We continue to see activity in tenant buy-outs, rehabs, and repositioning. Madison Realty Capital recently closed multiple $100MM+ financings for two separate micro-apartment strategies here in West LA, for example.

Q: How are you advising investors or developers today, given the current climate?
A:
Anybody that is beginning an entitlement process today should be cognizant that they are likely entitling for the next cycle. Developers that can deliver their deals based on today’s market rents and construction costs should proceed cautiously but bullishly. Those banking on continued rent growth to make their deals pencil are taking risks that may not pay off. Our clients are creating value by buying right and delivering projects quickly.

Q: What types of projects seem to be best suited for the market today?
A:
Multifamily continues to perform strongly. As previously mentioned, there is a growing movement towards smaller units, micro-apartments, and co-living with shared amenities and even living areas.

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For comments, questions or concerns, please contact Dennis Kaiser

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