Multifamily Investment Opportunities Abound in the South Bay – City of Hawthorne
May 1st, 2018 by
Recently I joined Greysteel, a leading transactional commercial property adviser for private, middle-market and institutional investors. My focus is to expand the company further into the housing market throughout the South Bay region of Los Angeles County. The South Bay stretches from Inglewood to the north all the way to Rancho Palos Verdes, near Long Beach, to the south.
I am very excited to join Greysteel, this asset sector, and this market. There is a lot of opportunity for growth, and, unlike the City of Los Angeles, there is no rent control in South Bay cities. Greysteel has been growing faster than any other in the industry, and this gives me the opportunity to build my book of business with it, and develop a team. What better sector to be in than the South Bay multifamily division?
Apartment buildings are a hot commodity in Southern California these days, with the number of sales tripling since the recession and prices steadily climbing. Higher prices and lower returns are causing investors to look to offset costs by finding buildings with significant upside, what we call in the industry ‘value-add’ assets. Investor confidence in the stability of the multifamily sector remains strong, despite robust new supply levels, concerns regarding rising inflation, and interest rate hikes.
A recent study showed that the South Bay and Long Beach area were the most affordable L.A. County submarkets for investment and rent. People, businesses, and investors are becoming more attracted to the areas as nearby markets are pricing them out. The South Bay’s lower price points, ‘value-add’ potential, and higher yields have attracted investors and buyers from neighboring counties. More than 2,500 assets have traded over the past 3 years, with most selling for less than $175,000 per unit in the South Bay.
‘Value-add’ deals are increasing in neighborhoods undergoing gentrification like Inglewood and Hawthorne. That is largely due to the future $2.6 billion NFL stadium (where both the Rams and Chargers will play), an under-construction Crenshaw/LAX Metro rail line, and the Olympics coming to Los Angeles in 2028. The South Bay area and Long Beach will benefit greatly from the new construction and improvements to these sports and recreation facilities. In addition to development, more job opportunities will be created because of the Silicon Beach movement. More than 500 tech startups, incubators, and accelerators reside in Silicon Beach, including Google, Hulu, Snap, TrueCar, and YouTube.
The Boring Company, an infrastructure and tunnel construction company founded by Elon Musk in 2016, is headquartered in the City of Hawthorne. A 2-mile tunnel is currently under construction on a route from Hawthorne along Interstate 405 to Westwood causing more people and jobs in the local market. Because of this, and other business moving to the area, the city has approved a new mixed-use development that calls for the construction of 230 residential units with approximately 3,100 square feet of ground-floor commercial space. The project recently sold to Houston-based real estate development firm, The Dinerstein Companies, for a reported $18.5 million. Charles Company, a Los Angeles-based real estate company, has also purchased in the area and has started renderings on a $500 million mixed-use redevelopment of Hawthorne Plaza. A full buildout of the improvement, dubbed Magnitude LAX, will have over 600 housing and office units, and over 500,000 square feet of commercial space.
All of this leads us to know that home prices are high, and there is a housing shortage. This keeps people in the rental market with vacancy rates continuing to stay low. Investors look at apartments as a safe investment, including ‘value-add’ opportunities in gentrifying areas like the City of Hawthorne and surrounding South Bay cities.
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