West Hollywood land sales are in a slide.
It’s a trend that was already well underway as 2015 drew to a close. In the third quarter of 2015, the dollar volume of land sales reached $10.8 million only to drop to $3.5 million the following quarter and barely register in the first quarter of 2016, according to data from JLL.
The average cost of the land dropped too. The plots that traded hands cost an average of $1.8 million in the fourth quarter, compared to $3.7 million in the third. It was even lower than the average sale price since 1990, which is $2.6 million.
What may seem like a freefall is more complicated, said Rob McRitchie, a senior vice president at JLL. Putting a small submarket like West Hollywood under a magnifying glass will naturally reveal a series of ups and downs. In 2012, for example, per-square-foot land prices in the West Hollywood submarket jumped from $131 to $393 over the span of three quarters.
“You’ll see big fluctuations in volume, because there aren’t a lot of transactions,” McRitchie said.
In large part, there are few recent transactions because West Hollywood has a glut of commercial projects filling its pipeline. Currently, there are more than a dozen sizable construction projects kicking up dust along Sunset and Santa Monica boulevards alone.
The House of Blues at 8418 Sunset Boulevard, for example, will soon be demolished to make way for the Sunset Time project, which will have 149 hotel rooms, 40 residential condominium units, five residential units and six levels of subterranean parking. The project by Combined Properties will include a hotel restaurant, bar and entertainment spaces, as well as two rooftop pool and patio decks.
At 623-627 La Peer Drive, just off Santa Monica Boulevard, progress is being made on A. J. Khair Development and Construction’s La Peer Hotel, a 63,000-square-foot project that includes a 56-key hotel, penthouse residences, retail and a restaurant. The site was formerly a public parking lot leased by the city.
These West Hollywood corridors are attracting a long list of similar projects either planned or under construction. “Hotels are definitely driving the bus,” McRitchie said. “This means future construction will hinge on repurposing existing properties from the ground up.”