Development in Koreatown isn't slowing down. The market is on fire for new development, but with a lack of available land, developers are looking for alternatives. To maximize development opportunities, developers are assembling multiple land sites and demolishing the existing properties to build new construction. CGI – Strategies in Real Estate recently purchased an assembly of five sites with plans to demolish the existing properties and build a 130-unit property. This is becoming a trend in the market, where demand is consistently increasing.

“Sellers that own a property with dated apartment units might realize that the land site is worth a lot more for redevelopment,” Laurie Lustig-Bower, executive VP at CBRE, tells GlobeSt.com. “It may be an owner that is not experienced in redevelopment, so the best option is to sell the asset. Those landlords have recognized that there is a lot more value in the land than in the asset value. That happens often. In those instances, we look for a developer to take over the site.” Lustig-Bower represented the seller, a private investor, in the Koreatown development deal, along with Kamran Paydar, senior sales director at CBRE.

While assembling multiple land sites will maximize development in the market, there is still limited land available for new development. As a result, entitled sites have become extremely desirable. “There is opportunity in Koreatown,” says Lustig-Bower. “I don't know how many sites are available, and if the site is already entitled, then it is much more desirable.”

The Koreatown market has grown in popularity in recent years, largely as a result of spillover demand from the Downtown Los Angeles renaissance. “Interest is definitely high in Koreatown, and we have seen interest continue to grow,” says Lustig-Bower. “In fact, we have another property that is in escrow in Koreatown. It is another development site that is zoned to build 130 units.”

Just like land prices soared in Downtown Los Angeles as a result of the renaissance, Koreatown has experienced similar pricing increases. According to CBRE research, rental rates in the market have increased 5.4% to 8.9% per year between 2012 and 2015. “There is a direct correlation between rental rates and land values,” says Lustig-Bower. CGI's Koreatown site totaled 30,000 square feet and traded hands for $10.5 million, or approximately $350 per square foot. “Years ago, you couldn't get these kinds of prices in Koreatown, but today, the market has become very hot and desirable,” adds Lustig-Bower. “There are a lot of new retail and restaurant options that have come into the market, and it has really become a cool place to live.”

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Investors Assemble Lots to Maximize Development in Koreatown

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