WEHO Condo Prices Up 8% YOY

LOS ANGELES—Ness Holdings, a local developer, has received approval from the city to build a 35-unit condo development in West Hollywood. Demand for for-sale product is ramping up in the area, and prices for condo properties have increased more than 8% per square foot year over year. Ness Holdings plans to develop a class-A property, of which there is a very limited supply in that market, on the corner of Santa Monica Blvd. and Fairfax.

“I believe the overall demand for new homes, whether it be single-family or condos, is strong.  In particular, demand for condos in West Hollywood has been improving at a very fast pace,” Daniel Mense, a director at Ness Holdings, tells GlobeSt.com. “We're seeing that the median condo sales price on a per square foot basis has risen 8.16% from 2014 to 2015 and that overall median prices have increased 7.5% over the last year, which is on pace with Beverly Hills. I think this is in part driven by the rapid upswing in single-family home prices.  New construction on single-family homes coming to market are fairly pricey and many new homes can't be purchased for less than $2.5m.  This has made it very difficult for first or second time homebuyers to buy in West Hollywood.  As a result, the condo market is rapidly filling the void and allowing homebuyers more affordable alternatives to living in West Hollywood.”

Ness Holdings underwrote the project both as for-sale condos and as rental apartments, and will finance the project with a bank loan. While bank loans have been difficult to secure for condo developments, Ness Holdings got strong interest for the project both because of the location and because the dual exit strategy. “We are funding the construction portion of this project with bank financing,” says Mense. “While the market for condo financing is still a bit soft, banks have shown a very strong interest in this project due to its prime location and the strong market demand for for-sale products.  Additionally, we've underwritten this project as an income property and it is still viable, as well as.  The fact that our project works as both a condo project and apartment building gave banks great comfort with the deal.”

Ness Holdings plans to break ground in the next 30 days. Given the lack of new product and the increasing demand, the developer believes it is at a sweet spot in the market.