Bryan Glenn is a senior director of the Charles Dunn Co.
LOS ANGELES—Koreatown is poised to become a core L.A. market, according to Bryan Glenn, senior director of the Charles Dunn Co., who says that the market has already shifted from gentrifying to future core. In the last two years, investment in the Downtown Los Angeles-adjacent market has soared, with major sales (we all remember TruAmerica's record-breaking acquisition of the Vermont) and unyielding demand. Today, investment in the market is hotter than ever. To find out where Koreatown is today, if it is too late for investors to break in and where the market is headed, we sat down with Glenn for an exclusive interview. Here, he gives us an inside look at the market.
GlobeSt.com: How has investment interest in Koreatown changed and what kind of activity are you seeing?
Bryan Glenn: Interest in multifamily investments in Koreatown is as strong as I have seen it. In my opinion Koreatown has shifted from a gentrifying market with future potential to a core market that has already proven itself. Millennials are making up a larger and larger demographic in the area and are attracted to what Koreatown has to offer. They are often looking for smaller units at attractive price points in a building or area that offers amenities. As an example, we are currently marketing for sale The Avalon, a recently renovated, non-rent controlled 47-unit apartment building on Catalina Street in the heart of Koreatown. That building has had an extremely successful lease-up, offering studios for $1,345 and 1-bedroom apartments for $1,495. It features modern upgrades such as Bluetooth smart locks for keyless entry, a community bike-share program and is walking distance to the red line and purple line metro stations providing easy access to Hollywood and Downtown Los Angeles.
GlobeSt.com: Why is this a good investment market, and what kinds of investors are active here?
Glenn: This market has all of the fundamentals that investors should be looking for in multifamily properties. It is one of the most central locations in all of Los Angeles and within the submarket features a variety of retail, dining and entertainment options. At the same time, it is adjacent to Downtown Los Angeles and Hollywood, both of which are accessible by Metro and are major employment centers.
The profile of active investors in Koreatown now fill the spectrum from private “mom and pop” landlords to major institutional investment companies and everything in between.
GlobeSt.com: Multifamily has gotten the most attention from investors, but are you seeing investors start to look into other product types?
Glenn: In my recent experience, investors in Koreatown are staying with multifamily properties because of the strong fundamentals. Rental demand in the area is as strong as ever and with the very rapid recent growth in rents, many buildings still have significant remaining rental upside. In fact, some of the interest we are receiving on buildings such as The Avalon mentioned earlier is from investors exchanging out of retail centers or out-of-state multifamily properties in favor of acquiring multifamily properties in Koreatown (and Los Angeles in general).
GlobeSt.com: How has investor interest affected pricing?
Glenn: Naturally, the strong demand for multifamily product has pushed prices higher and created capitalization rate compression. But the other major factor has been rent growth, which has allowed investors to pay substantially more on a per unit and per square foot basis while still being able to confidently project hitting their desired investment returns.
GlobeSt.com: For those investors just looking to break into the market, what are the barriers to entry? Is it too late to still find good opportunities?
Glenn: The primary barrier to entry at this time is the lack of inventory of multifamily properties for sale. In both Koreatown and greater Los Angeles, the number of sellers is limited and therefore, when buildings become available it is typically a very competitive bidding process. In some cases, in order to “win” deals buyers are doing all inspections in advance and making offers free of any financing and other contingencies.
GlobeSt.com: Where do you see the market in the next 12 months? Five years?
Glenn: I believe the Koreatown market will only get stronger as the purple line expands west, Downtown Los Angeles continues to boom, and new construction continues to come to the area. However, I believe the rate of rent growth across Los Angeles will start to slow down in the next 12 months. There will certainly continue to be great opportunities but at a certain point, investors will not be able to underwrite to the same rental upside that we have been seeing. They will need to sharpen their pencils and focus more on the going-in capitalization rates in the years ahead in order to hit the desired returns.
Steady gains in the US economy have resulted in net positives for the multifamily sector—will this wave continue for the foreseeable future? What's driving development and capital flows? Join us at RealShare Apartments on October 19 & 20 for impactful information from the leaders in the National multifamily space. Learn more.
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Kelsi Maree Borland
