By Stephen Cheung
More and more Chinese real estate companies call downtown Los Angeles home. In 2016, the City of Los Angeles secured 7 percent of all Chinese investment in American real estate, second only to New York and San Francisco. Colloquially referred to as DTLA, investments in downtown Los Angeles are easily seen in skyline’s panoply of cranes from miles away. And the projects are big.
Beijing-based Oceanwide Real Estate Group bought the 4.6-acre site of the Fig Central mega-project, now called the Oceanwide Plaza. The company is looking to build three towers, one with 49 stories and two others with 40 stories, with condominiums, hotel rooms and nearly 167,000-square feet of retail space. The project is estimated at $1.4 billion.
Moreover, Shanghai-based Greenland Real Estate Group purchased the 6.3-acre Metropolis site just north of L.A. Live. The company is in the midst of construction on its $1 billion, multi-phase project. One of the three premium condominium towers is currently open, as well as the 19-story Hotel Indigo.
Real estate investment firm Shenzhen Hazens snapped up the Luxe City Center hotel, and two adjoining lots for $105 million, with a renovation and residential project to follow that’s estimated at a collective $700 million. Lastly, City Century, which is a subsidiary of Shanghai-based development firm ShengLong Group, announced plans for a massive complex near LA Live that will include three skyscrapers—among them a 65-story tower that will be among the tallest in the city. All told, Chinese investment accounts for roughly $4 billion dollars of current projects in a 1-mile radius section of DTLA.
DIVERSIFICATION OF CHINESE INVESTMENTS
There are several factors that are making Downtown ripe for the current and sustained wave of Chinese investment. None is more important than diversification. Chinese firms are looking to diversify their investments, and seeing huge opportunities to make a return, along with the familiarity of L.A. to Chinese individuals. Downtown Los Angeles' status as an urban center is growing with a solid base of residential, retail, and hotel real estate, making it very appealing for investors looking for longer-term investments. Unlike San Francisco and New York City, Downtown Los Angeles still has underutilized parcels, such as parking lots, in strategically-located areas that are appealing as sites for future large-scale projects.
The local government is also energized by these new developments. LA Mayor Eric Garcetti is supportive and is highly encouraging partnerships between Angelenos and Asian business partners to invest in Los Angeles to create jobs and to spur additional economic growth. Organizations, like the LA County Economic Development Corporation, continue to develop new and innovative programs to assist international companies seeking to locate or expand their operations in the Los Angeles region.
There is an increasing demand for residential properties in DTLA and more investment is needed to help fuel Downtown LA’s development boom. It's projected that the population of Los Angeles County will increase 3.5 million by 2050, and it will remain the largest county, with Los Angeles as the largest city, in the state. By 2060, the county will have a population of 11.5 million. More importantly, people are very positive about the future of DTLA. In 2015, the Downtown Center Business Improvement District (DCBID) launched a survey of Downtown residents. It found that 79 percent of residents thought DTLA is moving in the right direction and more than 83 percent of the residents are passionate about the future of DTLA.
LOS ANGELES AS A REAL ESTATE MARKET
Los Angeles continues to be one of hottest real estate markets in the country. Since 2014, there have been 97 Downtown construction projects, such as the new housing project on the old Park Fifth site, a South Park mega-complex. One cannot walk more than two blocks without seeing scaffolding and redirected pedestrian walkways. Public transportation projects around Los Angeles and downtown are also playing an important role in attracting new residents. In the 2016 election cycle, Los Angeles County voters passed Measure M, a half-cent sales tax to support public transportation projects. With 71.5 percent of the voters supporting Measure M, the region is expected to generate an estimated $120 billion over 4 decades dedicated to transportation projects. The Los Angeles County Metropolitan Transportation Authority is expected to invest heavily on public infrastructure projects that will help drive the economic revitalization of DTLA. This, additionally, is attracting other types of Chinese companies to the region, including transportation industry giants such as CRRC and electric bus manufacturer BYD.
There is a real renaissance taking place in downtown Los Angeles with Chinese investment acting as an important catalyst. A strong, diverse economy with solid market fundamentals, continues to be the backbone of the region’s success and growth in the real estate market. There seems to be no slowing to DTLA achieving its renewed destiny of returning to its position as the center for the 18.7 million residents that call the greater Los Angeles region home.
(Editor’s Note: May vary slightly as published.)