BEVERLY HILLS, CA-Condos are back, industry experts say. As GlobeSt.com recently reported, during IMN’s Winter Forum on Opportunity and Private Investing in Laguna Beach, William Trefethen, managing partner with Parse Capital LLC, said as the economy continues to recover and jobs are added, a lot of product is being converted to condos.
ETCO Homes recently completed a set of 34 luxury condominiums here called 432 Oakhurst—the only new condo community coming to market right now in Beverly Hills and the first built in a long time—which Bob Etebar, co-founder, principal and COO calls the start of a new real estate trend toward condo development. With a near sellout of these condos to both domestic and international buyers, GlobeSt.com caught up with Etebar to discuss why condos are experiencing a resurgence and why foreign investors see this product type as a safe haven.
GlobeSt.com: Why are condos making a return as a strong real estate category?
Bob Etebar: There’s relatively very little inventory right now and not that many new for-sale condo projects, particularly in cities with high barriers to entry and higher populations such as Beverly Hills (Los Angeles), San Francisco and New York. There also are not that many foreclosures, and it’s becoming more of a seller’s market. Plus, single-family homes are priced so much higher—at least in markets where we operate—so there’s an affordability factor for condos.
GlobeSt.com: Can apartments and condos be strong at the same time?
Etebar: We’re in a really dynamic market right now, where both apartments and condos can be strong at the same time. In Beverly Hills, we’re seeing the rental of apartments for $4 to $5 per square foot, and we have a number of projects throughout L.A. that are selling or will have strong sales.
GlobeSt.com: Are people building more apartments or condos?
Etebar: There’s a lot of multifamily being built and has been built for the last five or six years.
GlobeSt.com: Are there a lot of condo developers?
Etebar: There aren’t as many for-sale condo developers now as there have been in the past. Many developers are not developing for-sale condos as much because of complexities that don’t exist with the long-term hold aspect of apartments, and that makes for a different business plan.
GlobeSt.com: Which is more prevalent for the near term; new builds or condo conversions?
Etebar: We see new builds in the near term. If we see a continued lack of inventory for condos, we may see condo conversions again. It’s difficult to acquire land today, so not only are land prices tough to deal with, but getting projects through the city processes and getting them built can take some time, so we may see some condo-conversion players coming back.
GlobeSt.com: Who will benefit most from this trend?
Etebar: Right now, the land sellers are—it starts there. The cities that have increased activity in permits and property taxes will benefit. And then, there are a lot of jobs being generated in the construction and consultant fields. Then the developers – who are making a significant bet on the deals hoping for a profitable project. Lastly, the buyer could be benefiting the most on some level, especially depending on when they buy.
GlobeSt.com: Why do foreign investors see condos as a “safe haven” as opposed to other categories of real estate?
Etebar: It’s important to note that we typically are most familiar with prestigious markets like Beverly Hills. With that said, people feel safe investing in this type of market. In other countries, there’s political instability, fluctuation in currency, and there’s some uncertainty out there right now in general with the foreign markets. Investors feel secure investing in a place like Beverly Hills, which is an affluent city where real estate values are maintained. Pertaining to the condos themselves, less maintenance is involved in new condos than in a single-family home. There are fewer worries about security because of secure-access features, and from many angles it’s a safe investment.