UPDATED, Monday, August 5, 1 p.m.: In life, everything is cyclical. One day you’re hot, the next you’re not. And the day after that, you rebound and you’re hot again.
Such is the case with the cachet of West Adams, a 1.5-square-mile area at the northernmost part of South Los Angeles along the Santa Monica Freeway, where investment is gushing in. Developed in the late 1800s by railroad magnate Henry Huntington, West Adams was one of the first neighborhoods in Los Angeles — and also one of its wealthiest. By the early 1900s it was outshone by the star power of celebrity residents in Hollywood and Beverly Hills. But for the first time in about a century, the area is returning to prominence.
A convergence of factors has sparked a surge in the neighborhood over the past couple of years, with office conversions, rapid lease deals, new retailers, and mixed-use projects recently coming into the area.
The expansion of the Metro Expo Line — which opened three stops in West Adams in 2012, and completed its route between Downtown Los Angeles and Santa Monica in 2016 — has opened the door for more density bonuses, which are given to multifamily developers that include affordable housing through the city’s Transit Oriented Communities program.
Most of West Adams is also a federally designated Opportunity Zone (OZ). The OZ program was enacted as part of the federal Tax Cuts and Jobs Act in 2017 and offers tax incentives for development real estate in lower-income districts (check out our story on the biggest deals in L.A.’s Opportunity Zones on page 20).
Opportunity Zone-targeted investment is coming in. For example, in April, Abington Emerson Investments launched a Qualified Opportunity Zone Fund that will invest in three real estate projects on Jefferson Boulevard in West Adams: a 30,000-square-foot office building, a microbrewery and a two-story office building with ground-floor retail.
At the same time, nearby areas like Culver City, Century City and other office hubs have been overrun by tech and media companies gobbling up office space. That has pushed the door open for West Adams to gain traction as an affordable alternative.
“The cat is out of the bag a little bit on the excitement around West Adams,” said Jeff Weller, managing principal at Lion Real Estate Group, which has made a number of acquisitions in the neighborhood.
In the last week of June, the firm acquired a newly built 15,500-square-foot office property at 5242 West Adams Boulevard. Three potential tenants are competing to negotiate a deal for the space. One of the contenders is looking to relocate from Culver City.
Weller said Lion Real Estate is leasing its West Adams properties for about 20 to 30 percent more than the firm was expecting.
“It’s going to be as exciting or more so than Culver City,” Weller said. “It’s drawing more favorable lease rates and hot restaurants. That includes a lot of great amenities and eateries that will excite people. West Adams is the future more than any other place in the market.”
Gabe Kadosh with Colliers International said he’s also seen steep increases in rents for office and retail space in the area. Retail space in the neighborhood runs from $24 per square foot per year up to $60 per square foot per year in spots along Jefferson Boulevard, he said. In Culver City, it’s in the range of $54 to $96 per square foot.
The Luzzatto Company, which is also active in the neighborhood, is seeing office leases inked for rates about 20 percent higher than when it entered the market in 2011. But the firm’s president, Asher Luzzatto, said those rates are still about 30 percent less than the average in Culver City.
“It’s still a massive discount in West Adams from Culver City and West L.A., and I would argue it has much better space,” Luzzatto said. “Some of the buildings we’re looking at are perfectly positioned for creative redevelopment. And with the public transportation, it’s more idyllic because you can pull talent from both Downtown and the Westside.”
Luzzatto said he has seen land prices go up about 33 percent in a year. He added that properties under 10,000 square feet are trading at more than $500 per built square foot or more than $400 per square foot of land.
Lion Real Estate and the Borman Group have both worked in the Arts District near Downtown L.A., which is years into its own renaissance. Weller said they are seeing tenants and leases similar to the ones that moved the needle in the Arts District, where the market gained similar momentum from companies facing higher prices on the Westside and in Downtown Los Angeles.
“There are also a lot of buildings that have vintage industrial bones that are hard to re-create,” said Mark Borman, co-founder of the Borman Group. “For right now, West Adams is an affordability pocket compared to Santa Monica, Culver City and parts of Downtown L.A.”
Top-tier tenants
That “affordability pocket” Borman references has lured some prominent brands to the neighborhood of late.
“Culver City and Century City have been fairly pricey,” said Weller. “That’s what we saw with TheRealReal.”
TheRealReal clothing brand (no relation to The Real Deal) is relocating from Century City after it recently signed a lease to occupy all 29,690 square feet in a West Adams building for its new headquarters. The newly converted office building is located at 3317–3325 Exposition Place.
In a joint venture, Lion Real Estate Group, led by Weller and Mory Barak, and the Borman Group developed the two-building project. The lease was valued at about $1.3 million per year, according to Lion’s marketing materials. Lion purchased the property in December 2017 for $7.3 million.
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That lease came shortly after a similar deal with salad chain Sweetgreen, which is moving its headquarters to West Adams from Culver City. The Luzzatto Company redeveloped a former Unified Grocers building after acquiring it from Olson Company, a multifamily developer that specializes in affordable housing. Sweetgreen is expected to move in after the start of 2020. The fast casual chain’s headquarters will occupy 50,000 square feet on a two-acre parcel at 3101 Exposition Boulevard.
Scott Laurie, president and CEO of Olson Homes, said West Adams was relatively undiscovered until now. Olson still owns the adjoining administrative building, a yard and a parking lot across from 3101 Exposition. The company may end up selling them, but it is also looking at alternatives.
He said he has seen significant increases in land values and prices in the past two years but that it feels more stable now.
Laurie said Olson will continue to look at opportunities in the West Adams area, as it’s still affordable — “by L.A.’s standards” — to build new homes there. It is completing 78 townhomes in a development called the Expo Walk just outside West Adams in Leimert Park. It’s set to open in August.
The Luzzatto Company is also converting the property at 3339 Exposition Place into office space. It’s already pre-leased to GOAT, an L.A.-based startup e-commerce company. Asher Luzzatto said the 56,000-square-foot structure is almost complete.
“We were the first ones in the area,” he said. “We bought that building from Steeldeck and starting negotiating in 2017, when nobody else was in West Adams.”
He compared the burgeoning neighborhood to the development around the Bergamot Station arts complex in Santa Monica that started about 20 to 24 years ago and said his firm was the first firm to own and lease a creative office in that area.
“West Adams has all the markings of a deeply creative community, and it has the kind of physical space that supports that kind of community,” Luzzatto said. “I think we’ll look three to four years down the road and say this is the new version of Bergamot Station.”
Correction: The developer of the Sweetgreen headquarters was incorrectly identified in a previous version of this story. This version has also been corrected with an accurate average price per square foot for built properties under 10,000 square feet in West Adams.