Downtown Los Angeles is hitting a stride. Recently, several major retailers have moved to the market, the office vacancy rate is trending downward, and despite the massive multifamily construction activity, apartment absorption remains healthy, according to the third quarter report from the Downtown Central Business Improvement District. Population growth is behind the activity across asset classes, particularly in the residential market, which continues to be the driving force in the market.
“The population growth continues to be the underlying engine that drives growth. The more people that are living down here makes the retail market so much more viable,” Nick Griffin, executive director for the DCBID, tells GlobeSt.com. “Residential continues to be the catalytic under current for the growth. We have hit the tipping point in terms of perception. Downtown is being recognized as a viable and appealing market unto itself. That is why you are seeing these new retailers coming in. There is a recognition of the strength and appeal of the market.”
The apartment market is particularly impressive. According to the report, occupancy rates are up 1.5% for the quarter with rents up 3.3% per square foot. Downtown Los Angeles is home to the majority of the new construction activity in Greater Los Angeles. “There continues to be a huge demand for housing in the Los Angeles area, and because Downtown is able to grown significantly and significantly more than a lot of other L.A. area, we are getting the lion’s share of that development. In the macro market, housing demand is far outstripping supply,” says Griffin. “Downtown lifestyle that has been created by the retail and the new restaurants; by the continued growth of arts and culture; by the continued growth of the job market down here. That has made the lifestyle down here very compelling.”
Griffin adds that the quality of the apartment product is also helping to drive population growth and apartment absorption in the market. “The quality of the product. I am really impressed every time we do our housing tour,” he explains. “Last month, we visited Circa, Metropolis, 888 South Hope and the Griffin. Each of those properties is really impressive with really nicely designed units in great locations. There is a lot to be said for the product that is being delivered.”
While there market has continued to grow, there are still plenty of untapped opportunities. “As much growth as there is in Downtown Los Angeles, there is still a lot of opportunity that hasn’t been tapped,” adds Griffin. “There are plenty of development sites that haven’t been built yet. There are still plenty of retail corridors that are not yet living up to their full potential.”