Units underway in still-active Koreatown neighborhood are the lowest since 2018
By Ryan Patap
CoStar Analytics
September 19, 2024 | 2:13 P.M.
Multifamily construction activity is tapering in one vibrant Los Angeles neighborhood.
With around 2,200 apartment units underway, Koreatown remains among the city's most active neighborhoods for apartment construction, second only to downtown Los Angeles. However, the area's activity has notably moderated over the past two years, falling from a high of 4,200 units underway in mid-2022.
Part of this fall stems from rising debt costs, which have prevented developers from securing financing at terms that allow for targeted returns. The neighborhood has also seen vacancy rise from a recent low of 4.3% at the start of 2023 to 6.5% as of late September. Current vacancy levels are above historical averages, likely providing multifamily developers with another reason to pause.
Construction activity is also likely hampered by additional transfer taxes on residential and commercial property sales imposed by the city of Los Angeles in April 2023. Sellers in Los Angeles now face an extra 4% transfer tax for any sale above $5 million and 5.5% for any sale above $10 million. Developers, who typically hold apartment complexes a shorter period, now need to incorporate this additional cost into their underwriting.
Jamison Services remains the dominant developer in the area and is behind the three notable projects underway. Jamison is converting a 19-story office tower at 695 S. Vermont Ave. into a 255-unit community that will finish in the coming months. Western Station, a 230-unit, ground-up project at 800 S. Western Ave., is scheduled to finish early next year. At 3875 Wilshire Blvd., Jamison has a 227-unit project slated for completion in late 2025.
Although construction activity has tapered over the past two years, Koreatown will likely remain one of the more active locations for multifamily construction in Greater Los Angeles thanks to ample remaining sites ripe for redevelopment. CoStar currently tracks over 20 proposed projects that could bring the area thousands of additional units.
Additionally, given the softness in the office sector, additional office-to-apartment conversions are likely. Jamison Properties, also the largest office landlord in Koreatown, has already adapted several of its buildings. Last year, Jamison announced that it intends to transform several additional towers in the area into residential properties, and it is in the process of vacating those existing office tenants.
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