Industrial might be the first asset class to come to mind when you think of the South Bay, but multifamily—like in many markets of Los Angeles—is in high demand. There is ample capital seeking multifamily transactions in the market, and the expansion at LAX, Hollywood Park development and growing job market is expected to fuel multifamily activity this year.

“All kinds of investors are active in this market,” Michael McKinney, first VP and market expert at CBRE, tells GlobeSt.com. “There are value-add investors for sure, and that is probably 80% of the investors in the market. When the renovated properties come onto the market, thought, there are investors that are buying those properties and betting on the future. They might not have the ability or desire to do the renovations, so they are buying renovated properties to hold.”

While value-add investors are active in the market, there is limited new construction because of the lack of available land. McKinney says that there is only one apartment project of scale currently under construction in the whole of the South Bay. “There is no land in the South Bay. Whatever land there is would have to be rezoned, and that is really challenging,” says McKinney. “All of the residential land has been redeveloped, so unless the city does some rezoning or densification, there won't be much development. Hawthorne has had a few big apartment building projects due to their zoning change.”

The lack of development paired with no rent control makes it a hot market for investors of both value-add and stabilized product. “The limited apartment development has always been a benefit to value-add investors because there is no new product that they have to compete with,” explains McKinney. “They are definitely filling a need in that regard. A lot of mom-and-pops let their properties run down, and these guys come in and are able to offer a new apartment in a market where there aren't any. In addition, there is no rent control in the South Bay markets.”

Interest rates on likely going to tick up this year, and that is a mild concern for investment activity; however, job growth and the creation of new jobs—including the resurgence of aerospace jobs—is a good driver for continued activity in the South Bay. “Other than interest rates picking up, jobs are stronger than ever, and that is really what drives rents and occupancy in our area,” says McKinney.

Instant Insights /

Plenty of Capital for Multifamily in the South Bay

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