Tech Industry Driving For-Sale Housing Demand

Rising interest rates and peak pricing conditions have slowed home sale activity in Los Angeles, but growth in the tech industry will continue to fuel demand for housing. This is particularly true in markets with a strong presence of tech companies, like West Los Angeles, Hollywood and more recently Downtown Los Angeles. This suggests that the current slow down in market activity is a market pause.

“With companies like Google acquiring massive office space, like the Westside Pavilion) in the center of West Los Angeles and the influx of similar companies throughout Los Angles brings extreme growth, more offices comes more tech workers, requiring housing who will continue to make an impact on local real estate,” Brett Miller, a broker at Nourmand & Associates, tells GlobeSt.com. “Most of my developer clients are asking for product within a couple mile radius from what will be Google’s new site to tear down older homes that will make way for new more expensive properties, which the younger techies can afford.”

Now, every tech company with a household name has a presence in Los Angeles, and in many cases, these companies are growing. “Every tech giant has a significant presence in Los Angeles,” says Miller. His top list of activity includes: Apple’s build-to-suit in Culver City; Netflix recently leased a new 13 story building on Sunset Blvd in Hollywood to match its already existing 14-story office space; Google is renovating a 525,000-square-foot space at the old Hughes Co. airplane hangar for YouTube; and Facebook has a strong presence in Playa Vista.

Tech employees are not only driving demand for housing product, but this demographic is also driving up pricing to historic levels. This has become a cyclical trend on the Westside, the original tech hub of Los Angeles, and it is turning into a trend in other emerging tech hubs throughout the city. “The number of tech workers buying in Westside neighborhoods has driven up prices in the past, we saw this in Venice when Snapchat arrived and will continue to do so in what are already expensive areas,” adds Miller.

There is some concern from industry experts that new construction apartment and condo deliveries have begun to outpace demand, but Miller says that demand is strong enough to support the new construction. “There is a massive shortage of housing in Los Angeles, the rental market has never been stronger and continues to surge,” he says. “Governor Newsom has proposed granting one-time General Funds dollars of up to $750 million to the Department of Housing and Community Development to help jumpstart housing production because of the shortage.”

Millennials have also become the largest home buying demographic. “Millennials are now the biggest generational group of homebuyers accounting for 45% of mortgages, some of them are even moving up from their starter homes,” adds Miller. “There is a large amount of higher end product being produced which could take a little longer to move due to oversupply.”