A Long Beach office project is slated to be demolished to make way for new apartments in a sign of ongoing demand for the latter property type in Southern California.

Canadian developer Holland Partner Group purchased a two-story office building in Long Beach for $41M and plans to redevelop the property into multifamily.

Irvine-based real estate investment firm ValueRock Realty sold the roughly 74K SF Congressional Place, which it purchased in 2017 for $24M.

“Given the disparity between office and multifamily market fundamentals and favorable zoning,” this property is not being maximized by having an office on it, Newmark Managing Director Anthony Muhlstein said in a statement announcing the sale.

Office vacancy in Long Beach's downtown and suburban markets is hovering around 23%, according to Q4 2021 numbers from Newmark.

Meanwhile, Long Beach’s multifamily market has been on an upswing. The occupancy rate for Long Beach apartments was 97.1% as of the third quarter of 2021, an 11-year high, the Los Angeles Business Journal reported in January, when Onni Group bought a retail property in the city to redevelop into apartments. That project is located less than a block away from 6700 East Pacific Coast Highway.

The building sits on a roughly 2.5-acre property at 6700 East Pacific Coast Highway, on the border of Long Beach and Seal Beach. It has views of the marina and ocean, and it is adjacent to 2nd & PCH, a high-end retail center developed by CenterCal that opened in late 2019.

“We saw this as an excellent opportunity to sell the property as a potential future residential development and it being the highest and best use for the community,” ValueRock Senior Vice President Dennis Vaccaro said in a release about the sale. Vaccaro said the firm plans to use a 1031 exchange to put the proceeds into other Southern California properties.

Investors are also targeting existing apartment projects. MWest Holdings this month purchased 94 apartments on Ocean Boulevard for nearly $49M.

In addition to Muhlstein, Newmark Senior Managing Director Chris Benton, co-Head of Capital Markets Kevin Shannon, Vice Chairman Bill Bauman and Executive Managing Directors Ken White and Sean Fulp represented ValueRock Realty.