August 13, 2015

Why Multifamily Amenities Are Now More Important Than Location

For multifamily development, the rooftop deck and pool has almost become standard, as have the yoga room and poolside cabanas. The next level? Dog parks, and perhaps more cutting-edge, drone pads.

The all-stars on our Mixed-Use and Creative Development panel told the more than 500 attendees at Bisnow's Annual Multifamily Conference in Downtown LA there's still room to shock and awe with top-shelf amenities at new residential projects.

That doesn't mean developers can ignore the basics. Linear City Development principal Leonard Hill says restaurants are still among the most significant adds to multifamily products, and can have a major impact on rents. Leonard was joined on the panel by California Landmark president Ken Kahan, Lend Lease general manager Mike Concannon, CIM Group first VP Sondra Wenger, Suffolk Construction COO Min Zavarella and Colliers SVP Kitty Wallace, who moderated.

Despite all the concern over rising rental rates, Kitty says there's still room for growth—partially thanks to the continuously improving job numbers. She's concerned, however, about rising interest rates. She says a rate hike could dampen the market.

Others, like Ken, think we're a lot farther along in the cycle—mostly because of the prices. "I get emails all day with people wanting $500/SF for properties. When everyone's a seller, it feels like we're near the top," he tells us. Ken has several properties in development on the West Coast, and recently sold a Brentwood apartment complex for a whopping $1M/unit.

Our all-day extravaganza was concluded with CBRE vice chairman Brian Eisendrath interviewing Mosaic Real Estate Investors managing partner Ethan Penner, also known as "The Father of CMBS." Chat with Ethan and foreign capital quickly comes up. He sees the market remaining hot for some time, as international investors will continue to plant their money in the much safer and more stable US economy.

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Clark Pacific (Hoover) LA
REFM (BetterDecisions) LA
Bisnow (StandOut)
CREW (Sept30-2015) LA
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UCLA Report: What Downtown Needs Next

There are a lot of cranes in Downtown LA, but Allen Matkins partner Tony Natsis says the market hasn't yet been able to achieve that "monster growth" in the shape of that big 300k SF tech tenant, according to the most recent Allen Matkins/UCLA Anderson Forecast California Commercial Real Estate Survey (click here to see the video). Some of that may come from housing and the fact that executives are hesitant to give up Silicon Beach and living near the water. Tony says as S.F. slows down and gets saturated, LA will pick up and the two markets will be closer to each other.

Allen Matkins (KadieWilson) LA
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3 Biggest Ways to Boost Affordable Housing in LA

LA, like much of the nation, is struggling with affordable housing. To afford the purchase of a median-priced home in LA, the average household would require a 53% raise, according to Paul Habibi, a professor at UCLA Ziman Center for Real Estate, who says this situation threatens the economic vitality of the entire state. Here are three ways he says we can help.

1. Expand Density Bonus

Paul says the classic LA sprawl, which created the suburbs as we know them, has created the unmanageable congestion and lengthy commutes LA residents endure. According to the city, only 187 market-rate projects between 2008 and 2013 employed density bonuses, bringing in 1,406 units of affordable housing. Paul says the city should loosen qualifying thresholds and expand the size of the bonuses. 

2. Amend Site Plan Review 

In the late '80s, neighborhood groups filed lawsuits that forced the city to enact the site plan review process, which has the planning department assess if a project that would add 50 residential units or 50k SF of commercial space is compatible with the surrounding neighborhood. As with CEQA, Paul says these groups routinely abuse this process to stall, water down or block development. He says projects that meet design guidelines and reach local affordability goals should bypass site review. 

3. Utilize the EIFD

Redevelopment was, of course, affordable housing's best friend. With the approval of SB 628 last September, the state authorized the establishment of Enhanced Infrastructure Financing Districts (EIFD), which somewhat resemble redevelopment. Paul says EIFDs provide cities and counties a way to seek funding for construction of affordable housing without additional taxes on residents or fees on developers.

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CohnReznick (Field2) LA
Bisnow (Niche-Orange)
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