Los Angeles Commercial Real Estate: A Thriving Market with Opportunities for Investors

The multifamily market in Los Angeles has been strong over the past 12 months, with transaction activity totaling $12.6 billion. This demand has translated into strong price appreciation in recent quarters.

One notable recent sale was the acquisition of Avalon Del Mar Station in Pasadena by Fairfield for $172.3 million. The 347-unit community, which was rebranded as Haven at Del Mar Station upon closing, sold at a 3.9% in-place cap rate.

Another major transaction was the purchase of Modera West LA by California Home Builders for $230.66 million. The 374-unit community, which was developed by Mill Creek Residential and rebranded as The Q Playa upon closing, sold at a 3.6% in-place cap rate.

Several large transactions in the Los Angeles market have involved public/private partnerships purchasing newer market-rate apartments and converting them into communities restricted to middle-income renters. An example of this is the purchase of The Crescent at West Hollywood by the California Statewide Communities Development Authority (CSCDA) and Faring for $100 million.

The average market pricing for multifamily properties in Los Angeles is currently $420,000 per unit, well above the national average of $260,000 per unit. Cap rates, at an average of 3.9%, are also lower than the national average of 4.9%. Key drivers of the market's elevated pricing include the city's position as the second-largest metro in the country, diverse economic drivers, and its land-constrained coastal location.