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‘Silicon Beach’ Boosts Prices in L.A., and Slowdown Isn’t Likely Soon

Vancouver may be suffering from "under-building," Australia is where millionaires are moving and more news from around the world

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This four-bedroom, five-bathroom newly constructed home in Venice is recently sold at $2.579 million. The area's average home sales price in 2016 was $2.15 million.

Andrew Bramasco
This four-bedroom, five-bathroom newly constructed home in Venice is recently sold at $2.579 million. The area's average home sales price in 2016 was $2.15 million.
Andrew Bramasco

Next week, Snap Inc., the parent company of popular photo messaging app, Snapchat, is expected to go public. If things go according to plan, stocks will be priced at $14 to $16 per share—and the company will be valued at around $20 billion—making this the biggest U.S.-based tech IPO since Facebook went public in 2012. The result, among others, will be a slew of new millionaires ready to snap up real estate in Los Angeles, where Snap is part of a burgeoning tech sector on the city’s Westside.

While Google first opened office space in the Frank Gehry Binoculars Building on Venice’s Main Street in 2011 and Snap started operating out of a nearby beach bungalow in 2013, today, both companies have spread out into additional office space and nearby neighborhoods. They now work alongside other tech giants like IMAX and Sony Playstation, as well as growing, but smaller, startups like DogVacay and Dollar Shave Club. The concentration of these businesses in the beachside (and nearby) communities of Venice, Playa Vista and Culver City have earned this area a catchy title: Silicon Beach.

More:Silicon Valley Spec House Seeks $42.8 Million

And just as Silicon Valley activity has driven up residential real estate prices in and around San Francisco for the past few decades, Silicon Beach is now having the same effect on the Westside of L.A., resulting in steep price increases in several communities, plus a new development meant to support the influx of wealthy workers.

"Silicon Beach has influenced the entire marketplace on the Westside of Los Angeles," said Colin Keenan, a senior vice president and managing broker at Douglas Elliman of California, noting that the most dramatic increases have been at the center of the area’s tech activity in Venice, where the median single-family home sales price was up 69% in 2016 versus 2012, and up 15% since 2015.


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While the city as a whole has also seen smaller scale price increases, huge sales in Beverly Hills, and a record-breaking listing in Bel Air, which can be attributed to the other market factors, like increased foreign investment, what’s happening in Venice—which has traditionally been known as more artsy and hip than its Northside neighbor, Santa Monica—is different, Mr. Keenan said.

"These are the same houses from five years ago. They’re the same size—mostly under 2,000 square feet—yet the prices have shot up almost 70%," he said. That means that in 2016, the average sale price for a single-family home was about $2.15 million (versus $1.3 million in 2012), and the highest price in the area was $9.4 million (versus $5.175 million in 2012).

More:Tech Money Brings New Players to Los Angeles’ Real Estate Game

While they could afford mansions in Brentwood or Beverly Hills, many CEOs and upper brass of these tech firms are staying put, said Tami Pardee, the founder and CEO of Halton Pardee + Partners, a real estate agency that works exclusively on the Westside. "No one wants to drive," she said, noting that people put a premium on convenience, but also value Silicon Beach’s walkable, urban vibe. "I’ve literally had billionaires buy $3 million houses because they don’t want to be out of the area."

Michael Grady, who manages The Agency’s Venice office, agreed. "These people all want to live where they’re working, and walk or bike to the office," he said.

As Venice prices continue to rise, nearby neighborhoods like El Segundo and Manhattan Beach to the South, and Culver City and Mar Vista to the East—all known for being more family-friendly than Venice, and with better public schools—have also seen the overflow Silicon Beach effect, experts say.

In Manhattan Beach, there’s been a sharp price increase for beachside houses in the area known as "The Strand," where houses that cost $8 million to $10 million five years ago are now selling for double that, Mr. Grady said.

More:Click to Take a Tour Inside AIRE Santa Monica: Silicon Beach’s Newest Luxury Residences

In Culver City, Mr. Grady said he has clients shocked that they have to pay $1.7 million for something that would have been $1 million four years ago.

And in Mar Vista, a bedroom community that’s considered more up-and-coming than Venice, the average sales price shot up to almost $1.5 million in 2016 from $860,000 in 2012—an 83% increase, even though the houses are only 20%, or about 325 square feet, larger, Mr. Keenan said.

Outside of these neighborhoods, where smaller single-family homes are the norm, a mixed-use urban community called Playa Vista is also accommodating a bulk of tech employees.

Located on a 2.2-mile-long, half mile-wide space that was once home to Howard Hughes’ aerospace empire, Playa Vista first unveiled residential units in 2002. Today, about 5,900 of a planned 6,046 residential units are completed, including rental apartments, condos, townhouses and stand-alone homes. There’s also a retail corridor with a Whole Foods, movie theater, yoga studio and burger bar, among other businesses; a STEM-focused public elementary school; and 27 neighborhood parks, including three dog parks.

More:What Millennials Want: Homes Designed for Connection and Convenience

Playa Vista is also where 5,500 employees currently work in "The Campus," where YouTube, Yahoo, The Honest Company, IMAX, and several advertising agencies, have office space. After Google, which bought 12 acres of office space, and other companies move in, that number is expected to jump to 10,000 employees, said Alison Girard, Playa Vista’s director of marketing. Right now, 10% of people who work in Playa Vista live there, too.   

Like other Silicon Beach-affected areas, prices in Playa Vista have risen significantly in the last two years, Ms. Girard said, noting that a new 1,600-square-foot, three-bedroom condo that would have sold for $940,000 in 2014, would go for $1.4 million today, representing a 49% increase in two-and-a-half years.

Two weeks ago, Playa Vista’s developer, Brookfield Residential, unveiled the newest residential units—14 three-story, 4,200-to-4,500-square-foot detached homes, known as Jewel, in partnership with luxury L.A. brokerage Hilton & Hyland. Starting in the high-$3 million range, these homes are by far the most expensive offered in Playa Vista, and the most luxurious, with high-end finishes, open floor plans and a third floor indoor/outdoor entertainment space.

An interior view of 5900 Village Drive at Jewel, the new Playa Vista development.

Hilton & Hyland

"At this price point, prospective buyers could buy anywhere that they wanted to in the city, but they’re looking hard at purchasing in Playa Vista," said Hilton & Hyland’s Kris Zacuto. "The strong demand is a good indication of where this area is headed."

More:Meet the Technology Startups Disrupting Luxury Real Estate

Whether Silicon Beach real estate will rise to the level of Silicon Valley real estate is unclear at this point, experts say, but there’s no sign that these increases will slow down anytime soon.

While prices may seem high, Mr. Keenan said, "in comparison to city’s where tech has a real presence, like San Francisco, New York and other world cities, L.A. is still undervalued."

But because supply is low, Ms. Pardee said, and demand is just getting stronger, that might not be the case for long. "I always tell people that they need to get in this market right away," she said, "because otherwise its growth will outpace them."

Here is a look at other news from around the world compiled by Mansion Global:

Even With Record Housing Starts, Vancouver May Be Under-Building

In spite of slowing prices and a brisk rate of housing starts, some experts argue that British Columbia’s hot real estate market still suffers from a lack of sufficient new construction. Case in point: Though 2016 saw the start of 27,900 new homes—a 33% increase from 2015—by the end of the year, only eight of the homes remained unsold. "(What that says) is that there is a huge demand out there," said Anne McMullin, CEO of the Urban Development Institute, which just released its quarterly State of the Market report. In particular, the institute pointed to pent-up demand among non-luxury buyers. (Vancouver Sun)

More:Residential Sales in Greater Vancouver Dropped 40% in January

The Dubai Property Show Plans A New Stop In Shanghai

On the heels of enthusiastic response in cities like London, Hong Kong, and Mumbai, the Dubai real estate exhibition is now planning a stop at the Shanghai World Expo Exhibition and Convention Center, slated for March 24. "We have seen rising interest from the Chinese investors and there cannot be a more opportune time than this to promote Dubai’s attractive real estate proposition to them," said one of the show’s organizers. According to numbers from the Dubai Land Department, Chinese investors invested AED1.74 billion (US$470 million) in Dubai’s real estate market in 2016, while the city’s Chinese population jumped by 53% in the past year, and Chinese tourism rose by 29%. (Khaleej Times)

Australia Tops List Of Destinations Where Millionaires Are Moving

If you take a "follow the money" approach to your real estate purchases, you’d do well to look to Australia, which saw the biggest influx of millionaires of any nation in 2016, according to a report from research firm New World Wealth. In fact, 11,000 millionaires moved to Australia over the the past year, compared to 8,000 in 2015. The U.S. was close behind, with 10,000 new millionaires taking up residence, but Australia has surpassed the U.S. and U.K. as traditional front-runners, thanks in large part to a spike in interest from wealthy Chinese and Indian buyers. Meanwhile, France saw an exodus of 12,000 millionaires in 2016 due to financial as well as safety concerns. (CNN Money)

More:Luxury Warehouse Living Growing in Popularity in Australia

Cut To Land Supply In Beijing May Lead To Price Hikes

Beijing’s government has released its annual land supply plan for 2017, which includes major cuts to total new land supply, down to 3,900 hectares (compared to 4,100 last year), with residential quotas reduced to 610 hectares from last year’s 1,200. The move is meant to control the size of megacities like Beijing, though real estate experts anticipate that tight land supply will put further upward pressure on prices, even as the government hurries to keep a lid on spiraling housing costs. "Mayor Cai Qi has promised to make sure home prices will not rise this year, and has implemented various tightening on developers and homebuyers," said Centaline Beijing researcher Chen Xiaoqing. "But with less land supply I’m not sure how he can deliver on that promise." (South China Morning Post)

Worries Mount That Toronto’s Housing Boom Is Based On Speculation

Following a massive 20% surge in home prices in 2016, some real estate experts in Toronto are abandoning the theory that prices are driven by tight supply, and are increasingly concerned about an excess of speculation. While regulations have prevented developers from some construction projects, sales prices in new condos—which saw 54,000 units come on the market over the past two years—still jumped by 15%, indicating that the issue isn’t purely based on lack of supply. Meanwhile, numbers show that many first-time buyers are shut out of the market, and Royal Bank of Canada economist Robert Hogue said, "If it’s not sellers, if it’s not first-time buyers, then who is buying? We can’t say for sure, but by deduction it’s got to be probably investors are buying quite a bit." (Financial Post)

More:Click to Read Mansion Global's Market Spotlight on Toronto

New York’s Chinese Investors Change Course In Wake Of New Capital Controls

China’s strict new controls on capital investment overseas are changing the way Chinese investors approach the New York market, with buyers scrambling to move funds and close deals, and fewer new investors entering the fray. In lieu of big-ticket purchases, Chinese buyers are now looking toward smaller-scale investments that are easier to finance, particularly as New York’s condo market softens and presents opportunity for value. "The real sweet spot is $1 million to $2 million," said Corcoran CEO Pam Liebman. "For people who aren’t super wealthy, but have enough money to transfer funds here to diversify their assets, it’s a number that makes sense." In order to avoid moving large sums of money all at once, Chinese buyers are also now turning to financing instead of once-popular all-cash deals, and Danny Fishman of Gaia Real Estate noted that some buyers are structuring deals where they offer a down payment of 10%, with payments spread out across the rest of the year. (The Real Deal)

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