Property

Star Power

Star PowerEven in transition the City of Angels could be a wise investment at all levels

Los Angeles is among the most mythic cities in the world. Not in romantic or historic way Paris and Rome are. Not in the high-powered, recession-fighting way London and Tokyo are. Not in the socially and culturally significant way New York and Berlin are. Los Angeles is its own distinct beast. It is home to the glitterati, aspiring or otherwise. Its hotels are frequently the locations of popular culture’s seediest and most written about murders, suicides and celebrity meltdowns. LA has the dubious honour of boasting one of the most terrifying police forces on the planet, one of the least intuitive international airports, hideous traffic snarls and being nigh impossible to manoeuvre as a pedestrian. Hardly anyone that lives there seems to genuinely like it. Yet everyone wants to go there.

Technically part of the LA-Long Beach-Santa Ana metropolitan area, Los Angeles is home to almost four million Angelenos, who rank among the United States’ most diverse urban populations. Despite being synonymous with Hollywood, Los Angeles’ $800 billion economy is one of the world’s strongest and aside from entertainment (comprising film, television, music and gaming) it incorporates finance, technology, education and international trade, with Pacific Rim connections that date back decades. Tourism is a major economic driver and there’s nothing quite like a drive up the PCH. And have you seen Frank Gehry’s Walt Disney Concert Hall?

Though sprawling star mansions and gunriddled ghettos are usually the first images that spring to mind when talk of LA comes up, it goes without saying there’s a lot more to the city’s property scene than those two extremes, which are minority sectors. National online property listing and analysis site Trulia reported current prices averaged just under US$300 per square foot in greater LA, down almost 40 percent from a year ago, and median prices were sitting at around $295,000 (also down), but sales were up by nearly 40 percent as well. Los Angeles’ property options are also wildly varied, from flats, to detached houses to branded residences.

“There’s a macro level and a micro level and real estate is very local. Statistically, the US dropped around 30 percent [after 2008]. Right now Las Vegas, for example, is off around 70 percent,” explains Patrick O’Neill, CEO of American investment specialist ONEILL Group. “Now in New York, a first tier city, those discounts today are still off about 15 to 20 percent. It’s trending on an upward path. Those are two extremes. Something kind of in the middle is California,” he finishes, echoing Trulia’s research. In prime districts, it’s a similar story. “Los Angeles from the peak to the trough was probably off around 40 percent, prime Los Angeles — Wilshire corridor, Hollywood, Sunset, these types of areas. Today it’s around 25 to 30 percent.”

One of the drawbacks to investing in LA is its pedestrian-unfriendliness. Cars are essential in LA. However, “The downtown area has gone through a bit of gentrification and they’re trying to create a pedestrian zone,” O’Neill notes. In 1999 unused buildings in the city’s central core were given permission to be rezoned as luxury residential and lofts, and that has been the basis of LA’s ongoing urban regeneration programme. Helping things along are the Staples Center’s opening the same year, the massive LA Live entertainment complex (which includes the Nokia Theatre, the JW Marriott and the Ritz-Carlton hotel and residences), the upcoming Wilshire Grand Tower and more zoning amendments in 2007. It might be a slow process, but the city remains committed to giving downtown LA a proper downtown vibe. And unlike New York or perennial hotspot London, you don’t have to look too far to find a bargain. “The W Residences in Hollywood has cut its prices over 40 percent and the last time I was there Cher and Christina Aguilera and people like that were there!” O’Neill notes enthusiastically.

So what kind of investor is Los Angeles right for? “What we’ve found with everyone purchasing in the US, they have some sort of connection already with that city. I forget the statistic exactly, but if Los Angeles were a country it would have the seventh largest GDP in the world or something like that. The trading between Hong Kong and Los Angeles, particularly with manufacturing and shipping, is very strong,” O’Neill points out. Not surprisingly educational institutions also play a role for investors with families looking at the long term. “How many kids from Hong Kong go to California schools?” LA is decidedly a first-tier city with easy access, but prime real estate can still be picked up for 40 percent less than just a few years back. “The discounts, compared with San Francisco or New York, are a big appeal,” O’Neill finishes. You could say angelic.