Sale of Runway expected to send Playa Vista land values soaring

Land was averaging $3.4M an acre before the $475M transaction

Apr.April 22, 2016 02:30 PM

Land prices in Playa Vista averaged $3.4 million an acre from 1996 to 2015, according to data from JLL. A fresh transaction, however, is expected to send that average soaring.

Runway Playa Vista, a mixed-use development that serves as the submarket’s 14-acre downtown, was purchased for $475 million in the first quarter of 2016 by Invesco Real Estate. The high $34 million-an-acre price tag on that deal is likely to drive up not only average land prices but property values in the entire submarket.

Playa Vista is a master-planned community near Marina del Rey. It is about a mile from the Pacific Ocean, close enough that it gets the “Silicon Beach” label which began in directly-on-the-beach Santa Monica. Over the years, tech companies like YouTube, Belkin, Facebook and Google have put down roots in Playa Vista.

Since Playa Vista is almost fully built out, there isn’t all that much land expected to trade hands, especially since most of the developments are new. But that’s all the more reason why land values are steeply rising. What was once the last large undeveloped tract of land on the Westside has become a tight market.

While its price was not recorded in JLL’s data, and thus not reflected in the $3.4 million an acre average, a key to Playa Vista’s rise was Google’s 2014 purchase of 12 vacant acres next to Howard Hughes’ “Spruce Goose” hangar. The aquisition was rumored to have cost the tech giant $120 million, or $10 million an acre.  

The largest sale before Invesco’s acquisition dates back to February 2007, when a 64-acre parcel near Jefferson Boulevard and Centinel Avenue sold for $200 million. The buyer, Walton Street Capital, paid just north of $3.1 million an acre for the site.

The 2007 transaction took place when Playa Vista was still largely undeveloped. The site traded hands when the original purchaser ran into debt trouble. It was eventually developed into a 1.1 million-square-foot tech campus.

Today, the Campus at Playa Vista is where YouTube and Belkin have set up shop, along with a growing number of media-related companies like Fox Sports, Fox Interactive and 72andSunny. Facebook just made the leap to nearby Playa Jefferson, where it is leasing a portion of the five-building, 35,000-square-foot space.  

Invesco plans to be part of Playa for the long-term. It reportedly will finish out and maintain the Runway development for the foreseeable future.

The Runway development has opened in phases—most debuting within the last year—and has cost an estimated $300 million to construct. Its $475 million sale is expected to impact land prices across the board, potentially causing surrounding commercial and residential site prices to rise.

“The entire surrounding area will be impacted by the Runway,” said Kevin Krakower of Teles Properties, a broker in the area. “Not just the skyrocketing prices for the townhomes and condos they are selling inside the development, but the surrounding areas are feeling the impact as well. A lot of people will be priced out of [Playa Vista], but Westchester and nearby areas like Palms, which are close drives to the Runway, are seeing property values increase as a result.”

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