Lendlease Development has acquired an opportunity zone development site in Culver City for $92 million. The 3.6 acre property currently houses a self-storage facility, but the zoning allows for commercial or mixed-use development. Lendlease plans to take advantage of the strong demand for both residential and office development.
This year seems an unexpected time for a significant land transaction, but seller La Cienega Properties saw continued demand in the submarket, despite the downturn. "The momentum and resulting price appreciation in Culver City made it a compelling time for the family to sell. The potential tax law changes were also a factor," Kevin Shannon, co-head of U.S. capital markets at Newmark, tells GlobeSt.com. Shannon a represented the seller in the deal along with executive managing directors Ken White and Rob Hannan and senior managing director Laura Stumm.
Lendlease saw the same market strength, and the developer plans to develop office or residential space. The existing self-storage facility provides cash-flow through the pre-construction phase, making it all the more compelling of an opportunity. "This is an exceptional transit oriented site in one of the hottest markets in the country," adds Shannon. "The site garnered significant interest even post COVID because of its location in a market benefiting greatly from content creation."
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While this was an attractive development opportunity, the pandemic did hamper investment demand for the site. Shannon says that office REITs in particular have slowed acquisition velocity. Still, the dynamics of this site brought buyer interest. Big tech and media employment continued to grow post COVID reinforcing the desirability of this specific site," says Shannon.
Other submarkets have suffered a greater reduction in investment demand. Shannon says that ebbs in demand have been submarket and property specific. "Demand for land for industrial and life science development is better than it was pre pandemic due to clearly superior fundamentals post COVID," says Shannon. "Demand for office development land has softened in many of the more urban markets with exceptions being high beta markets with continued strong fundamentals like Seattle and Culver City."
On the other hand, apartment land hasn't seen the same decrease in interest. "There is solid demand for multifamily land given the favorable dynamics anticipated once the vaccine has been widely distributed. The anticipated low interest rate environment upon completion of new projects is also assisting underwriting for new developments," says Shannon.
Despite the market change, Shannon says that land transactions actually increased in 2020 over 2019, driven by industrial and apartment development opportunities. He says, "We think that upward trend will continue in 2021."
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Kelsi Maree Borland
