November 13, 2018
Connect Westside Los Angeles is just around the corner on Nov. 27th at the Luxe Sunset. Registration is now open and you can find out more about the conference on this link.
We asked one of our panelists, Ken Fields of Greenberg Glusker, to share a few thoughts about what’s happening in the market, how it stacks up from a market fundamentals perspective and some of the challenges and opportunities. Check out his insights in our latest 3 CRE Q&A.
Q: What are the key trends you are tracking on the Westside?
A: Most of us look at the same core metrics, such as vacancy rates, absorption rates, rental rates and, of course, cap rates. However, I also consider what I’m hearing from my clients in the course of my representations. For example, in the past, many of my mixed-use developers and buyers looked at the retail components of a project mostly as a separate revenue stream, without considering how those retail components might impact an overall development. Today, almost every mixed-use developer and buyer I deal with seriously considers whether a project’s retail tenant base will attract tenants to their core residential or office space, thus allowing them to command higher rents. I also look at where the pop-ups are going, because landlords typically only rent to a pop-up if long-term quality tenants are not available.
Q: How does the Westside market differ from others in SoCal? What’s unique? How does it stack up in terms of demand, activity, fundamentals?
A: Median incomes on the Westside are very high, and that kind of consumer buying power attracts higher-grade retail and hospitality operators than one will find in less affluent markets within Los Angeles County. However, those same consumers can also afford to fund major challenges to new developments and particular tenants those consumers believe will not be compatible with their neighborhood. Those challenges, combined with City Councils and Planning Commissions that often focus on affordable housing and environment concerns, can make development on the Westside very expensive. Additionally, although cities like Beverly Hills and Downtown Santa Monica provide good public parking, aggregating sufficient land to satisfy parking requirements for a new project presents a significant challenge on the Westside.
Q: What are some examples that reflect what’s happening in the Westside market? What are the opportunities and challenges the Westside faces?
A: Retail is struggling throughout the country, but Los Angeles has largely been holding its own. Vacancy rates have been fairly stable year over year, and rental rates have moved up in urban and high-density areas like Beverly Hills, West Hollywood and Abbot Kinney. We’ve seen significant closures like the Westside Pavilion and Osh, but these closures also create opportunities, such as Hudson Pacific Properties’ joint venture with Macerich to redevelop the Westside Pavilion. Major developments on the eastern edge include Kilroy’s $450 million Academy on Vine project, and Harridge Development’s proposed over $1 billion Crossroads development which was recently approved by the Planning Commission.
For comments, questions or concerns, please contact Dennis Kaiser