Long Beach in general, and specifically Downtown Long Beach, is poised for major growth. Rent control was recently voted down in the city, and rents are expected to grow nearly 5% this year. As a result, investment activity has picked up in the market. The renovation and sale of Patio Gardens, a 127-unit garden apartment community, is an example of the opportunities in the market. A private investor purchased the property in 2016 for $35.3 million and sold it this year for $50.8 million. We sat down with Robert Stepp, a principal at Stepp Commercial, to talk about the Long Beach market and its growth.
GlobeSt.com: How do you expect Downtown Long Beach to change in the next few years?
Robert Stepp: Downtown Long Beach is seeing a significant amount of public money being invested in major redevelopment and expansion projects such as the Long Beach Civic Center, Aquarium of the Pacific and Queen Mary Island. Additionally, this market has over 28 residential, mixed-use and retail development projects in various stages of planning and construction.
With all of this activity, downtown has been experiencing a transformation into a thriving urban center and we will continue to see that accelerate at an even faster pace over the next few years. As the downtown high-rise shoreline is nearly fully developed, investors have been eyeing inland opportunities, and we can expect to see a number of older buildings to be replaced by modern high-rise developments. As job and population growth continue upward momentum, the number of hip new retail and restaurants will proliferate throughout the downtown area, filling in the gaps from one urban pocket to the next. These higher density and increased amenities will create a more active downtown scene much like the Gaslamp district in San Diego or DTLA today.
GlobeSt.com: How do you think the market will react now that rent control did not pass?
Stepp: The pace of transactions has picked up as buyers who were waiting on the sidelines to see what would happen with proposed rent control legislation are becoming more active again. We are not yet seeing a lot of new inventory hit the market, but I think there will be more property available over the remainder of 2018. We will continue to see an influx of investors coming from rent control areas in and outside of Los Angeles who are interested in non-rent control Long Beach opportunities as they seek cash-flowing and value-add assets here.
GlobeSt.com: Rents have increased dramatically. Do you see that continuing in the long term?
Stepp: Rents are anticipated to continue their rapid rise through the end of 2018. Long Beach rents increased a total of 6.5% over the past four quarters and are projected to rise 4.8% through the end of this year. Beyond that, we will most likely see a slower rate of increase as new inventory hits the market in 2019-2020.
GlobeSt.com: How has the renter profile changed in Long Beach over the last few years and how is this changing demographic affecting the retail and restaurant amenities coming into the area?
Stepp: Long Beach is doing a great job of attracting and retaining world-class companies that need highly skilled and educated workers. This has brought a more professional, affluent profile of renters looking for upscale, trend-setting retail and restaurant amenities – with hip dining establishments being at the top of their list. There has been an increase in well-designed, gastropub/craft cocktail/farm-to-table type restaurants throughout the city, along with restaurateurs who have been active players in markets like San Diego, West Hollywood and Santa Monica coming to Long Beach. Bo-Beau Kitchen + Roof Tap, for example, is owned by the Cohn Restaurant Group. We’re also seeing a more global offering such as Beer Belly Long Beach, which is the sister location of the popular Koreatown eatery, Sura Korean BBQ & Tofu House, 4th and Olive offering Alsatian cuisine, Aji Peruvian Cuisine and others.