Standard Communities has acquired Jefferson SoLA, a newly built 244-unit luxury multifamily complex in South Gate, Calif., for $130 million, Commercial Observer has learned. The City of South Gate sold the asset, according to property records.
CBRE’s Dean Zander and Stew Weston brokered the sale. The deal marks the duo’s second $130 million sale to Standard, the first being the 349-unit Monterey Station in Pomona, Calif., in December 2021.
Located at 10930 Garfield Avenue in South Gate, about 15 miles from downtown Los Angeles, the multifamily complex was completed in November 2021 and was approximately 50 percent leased at the time of sale. Standard expects the asset to reach full stabilization by the end of the year, according to a prepared statement from CBRE.
“Jefferson SoLA is well positioned to take advantage of the demand for newer and luxury housing that has been sorely lacking in the Los Angeles County south cities,” Zander said. “The location, combined with the scope and quality of the asset, were a huge draw for the new owner.”
The apartment complex’s amenities include a pool and spa with cabanas; gourmet grilling stations with indoor/outdoor seating; a fitness lounge with state-of-the-art equipment and a yoga/spin room; a double-height clubhouse with media wall and game area; a private conference center and coffee lounge; package locker service; a dog park and dog wash; a bicycle center; and multiple courtyards with fireplaces and fire pits.
Officials at Standard Communities did not immediately respond to a request for comment.
A CBRE report indicates the national multifamily sector saw record leasing activity, rent growth and investment during the first quarter of 2022. Meanwhile, Greater Los Angeles was 4th among all metros for multifamily investments over the past year, with $18.6 billion in total volume, or 5% of the U.S. total.
In terms of year-over-year rent increases, Greater Los Angeles came in 7th in the Pacific region, with a 13.9% jump, while Orange County landed in 2nd place with 17.7% rate hikes and Inland Empire was 3rd at 16.8% higher rents. “With continued strong rent growth throughout every Southern California market, ranging from 14% to 18% year-over-year, investors are drawn to multifamily opportunities, despite rate pressure,” said CBRE’s Los Angeles-based Executive VP Dean Zander. “Based on offerings we have in the market, there is abundant demand for well-located apartment buildings in this tight rental market.” Zander added, “We’ve noticed a resurgence in interest in markets that were negatively impacted by the pandemic, including Downtown LA and Hollywood.”
Pictured here is construction of an apartment building in the Koreatown neighborhood of Los Angeles. (Spectrum News/Joseph Pimentel)
LOS ANGELES — Investors are capitalizing on the high demand for housing in Southern California.
In the past four quarters, investors spent more than $18.6 billion buying apartments, duplexes and other multifamily properties in the Greater Los Angeles region, CBRE reported.
According to the new CBRE report released Thursday, Greater LA ranked fourth for multifamily investments over the past four quarters among the 69 metros the commercial real estate company tracks. CBRE defines Greater LA as the five counties of Ventura, LA, Orange, Riverside and San Bernardino.
Investors invested more in Dallas/Fort Worth ($29.1 billion), Atlanta ($21.3 billion) and New York (17.6 billion).
Nationally, investments in the multifamily sector reached $63 billion in the first quarter of 2022, a 56% increase year-over-year. CBRE officials said it's the strongest first quarter on record and brings the four-quarter multifamily investment total to $374 billion.
In the first quarter alone, multifamily investments accounted for 37% of total commercial real estate investment volume, followed by office at 21% and industrial at 20%.
The level of multifamily investment activity in LA was a 122% increase from the previous year, CBRE officials said. "Los Angeles recorded record volume last year," said Dean Zander, executive vice president of CBRE's multifamily division. "We surpassed pre-pandemic levels in terms of dollar volume and nearly matched it in terms of the number of transactions (2019 was slightly ahead). Since cap rates have continued to compress since 2020, pricing has surpassed the previous highs, and demand is far outpacing supply."
CBRE officials said household formations, job and wage growth, rent growth and rising home prices fueled demand for multifamily properties nationwide. "Renters are feeling emboldened by covid restrictions lifting," said Zander. "They are more comfortable spending more money on better apartments as they return to work. Confidence has been restored in the job growth markets throughout Southern CA."
The new report comes as the coronavirus pandemic wanes and people return to a "new normal" way of life, including returning to the office. The pandemic accelerated the demand for single-family and multifamily housing due to low-interest rates, work from home policies, and limited housing supply.
With so many people shut out of the single-family housing market because of the high prices or stiff competition, they've had to continue to rent.
Apartment rents went up by as much as 18% year-over-year across Southern California. Rent has gone up 14% year-over-year in LA. Orange County rent jumped nearly 18% year-over-year, and rent in the Inland Empire jumped 17%.
And as the Federal Reserve increases interest rates to curb inflation and housing prices remain high, relief remains far off for tenants and prospective homebuyers. "With continued strong rent growth throughout every Southern California market, ranging from 14% to 18% year-over-year, investors are drawn to multifamily opportunities, despite interest rate pressure," said Zander.
As companies call their workers back to the office, Zander said investors are targeting areas many workers fled at the onset of the pandemic, including downtown LA, Hollywood and other job-centric locations. "The Orange County, Inland Empire and San Diego markets command the most attention due to job growth in the life sciences industries, warehousing, distribution and logistics centers, and outpaced rent growth," he said.
While investors are capitalizing on the high demand and rent growth, it doesn't bode well for tenants.
As multifamily investors seek the highest return for their investments, expect rent to continue increasing. "We can expect to see continued upward pressure on rents as single-family homes remain unaffordable in nearly every metro," said Zander.