4 October 2014
After so many years of being off everyone’s screen, Los Angeles has suddenly become one of the hottest markets for real estate investment. Roger Vincent’s article of October 4, 2014, in the Los Angeles Times provides some of the latest and most exciting detail about how the “smart money” in New York now sees Los Angeles is a great place to buy real estate. See “Downtown L.A. real estate is drawing N.Y. investors’ interest.”
The transformation of Los Angeles to a “real city” where people live, work, and play has taken decades. The city has lagged behind many other gateway cities and its real property values have languished relative to other major markets. But the renaissance of DTLA is real. See “Hotel Lawyer in Los Angeles: Why does it seem like everyone wants to build or buy a hotel in downtown LA? It’s the “Renaissance of DTLA,” silly!”
And the new dynamics have changed international preferences for real estate investment.
Big changes in the past few years
Noting that downtown Los Angeles (DTLA) was “disdained” by Wall Street for real estate investment until lately, the Times article cites a 23% increase in the dollar volume of real estate purchased by New York-based investors in 2014 compared to 2013.
New York investment in the past two years has now surpassed $4.4 billion, and buyers are picking up or developing all commercial property types.
Getting in on the bottom floor of something that is going to be really big
JMBM hotel lawyers have represented many institutional investors acquiring real estate in California. But one major East Coast investor stands out for its decision several years ago to diversify its investment to the West Coast, particularly Los Angeles.
Their long-term views of real estate told them that Los Angeles is just a few decades behind New York in densification. They predicted that Los Angeles would become a vibrant urban center and a great place to own real estate. They foresaw the DTLA Renaissance with people moving back into the downtown area to live, and with Los Angeles becoming a “walking city.” As a result, they preceded what appears to be the new trend of getting in on the “ground-floor” in the exciting Los Angeles real estate market.
Sometimes it takes an outsider to see what can be done
Roger Vincent’s Los Angeles Times article cites a number of big players who think that the Los Angeles market is poised for major transition, the likes of which most local investors can’t even comprehend. And we are just at the tipping point now. The big change has been in the last 12 to 24 months.
For example, the Times says that downtown Los Angeles reminds New York investors of what their neighborhoods looked like before redevelopment swept through Manhattan.
The article quotes Greg Vilkin of New York real estate giant Related Companies as saying, “Los Angeles has hit critical mass in downtown.”
Some New York investors see the same potential in Los Angeles that they witnessed in Manhattan in Hell’s Kitchen a decade ago, or in TriBeCa and the High Line.
Presumably referring to redevelopment of such areas in Manhattan, that caught on like wildfire and skyrocketed in value, Related’s Vilkin says, sometimes it takes an outsider to come in and see what can be done.”
This may be the time for Los Angeles’ ascendancy
Despite its dominance in population and economic vitality, Los Angeles has lagged behind other cities in many aspects of growth and value increases. For example, Houston, Seattle and San Francisco have all expanded more robustly and are likely closer to peak values in the real estate cycle. But some think Los Angeles has a lot of room for real estate price growth.
With a population of nearly 4 million for the City (in a county with more than 10 million) and a dynamic economy, Los Angeles has long been a unique and prominent US city. Is this the moment in time that real estate values in the City of Angels begin to ascend? Some investors are betting on it.
This is Jim Butler, author of www.HotelLawBlog.com and hotel lawyer, signing off. We’ve done more than $87 billion of hotel transactions and have developed innovative solutions to unlock value from hotels. Who’s your hotel lawyer?
Our Perspective. We represent hotel owners, developers and investors. We have helped our clients find business and legal solutions for more than $125 billion of hotel transactions, involving more than 4,700 properties all over the world. For more information, please contact Jim Butler at jbutler@jmbm.com or +1 (310) 201-3526.
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