Multifamily Investment in L.A. Moves East

The Westside has long been the favored L.A. submarket for investors, but deal flow is growing in L.A.’s eastside markets as investors are finding more value-add and redevelopment opportunities. This isn’t totally surprising, considering eastside neighborhoods are emerging, up-and-coming markets with tremendous demand from renters. However, today, these markets are becoming entry points for investors new to L.A. Asana Partners, a North Carolina-based investor, recently entered the L.A. market with the purchase of The Fig Collection @ Highland Park, a three-property apartment portfolio in Highland Park.

“The Westside is a long established market and there has always been strong demand there,” Dana Brody, SVP at JLL, tells GlobeSt.com. “With that said, as the fundamentals became more and more expensive, both renters and investors sought out new and sometimes more interesting locations to own and live, which led to the resurgence of Echo Park, Silverlake and Highland Park. Over time, we have seen both rents and values on the east side many times being on par with the Westside due to that increased demand and of course the  ‘coolness factor’ that the Eastside commands.”

Highland Park in particular has quickly become a favored L.A. neighborhood, and was even highlighted by the New York Times earlier this year as one of five places to go in Los Angeles. With ample opportunities and lower barriers to entry that the Westside, it has become an attractive entry point into the market. “Highland Park is one of the great historic neighborhoods of Los Angeles that is seeing a huge resurgence, due to in part to its proximity to both Downtown Los Angeles and the Gold Line,” says Brody. “Highland Park is now home to many of the hippest eateries and nightlife destination in Los Angeles, including Kitchen Mouse, Highland Park Bowl, Blind Barber, Otono and countless others. Highland Park has built a reputation as a mecca for artists, with trendy shops, galleries, bars and restaurants that have been and will continue to open throughout the neighborhood. The Fig Collection represented a great way for an investor like Asana to get a foothold in this burgeoning L.A. market, which has been in transition for 10 years, and watch it continue to blossom and grow. I see Highland Park as the Abbot Kinney of 2025.”

Rent control is one of the major challenges for investors considering eastside assets. Some rents are well below market rates with long-term residents. The Fig Collection @ Highland Park includes a significant retail component to offset this challenge. “These assets are primarily retail with a multi-family component,” explains Brody. “The 12 apartments are subject to rent control, but because of the lack of rental options in Highland Park combined with the desirability to live right in the middle of the action on Figueroa, these units have tremendous upside potential should any become available.”

With options to overcome the rent-control challenge, like focusing on mixed-use assets, interest is only growing for eastside L.A. opportunities. “There is a great deal of interest in Eastside markets. Investors have long realized that there is a huge demand to live and play in Highland Park, Echo Park and Silverlake,” says Brody. “We are seeing a great deal of both new construction and renovation and remodeling of older units in all of those markets.  There is development going on all sides of Highland Park, including both for sale and for rent, as well as several mixed-use projects.”