Research Briefs

To Richard Green, the director of USC’s Lusk Center for Real Estate, Downtown in 2014 is like the Westside of 2007: The area is desirable partly because of a lack of affordable housing in surrounding neighborhoods. Plus, he added, there are enough amenities that allow people to live in Downtown without feeling like they are giving something up.

Another Downtown strength, he said, is that it’s cheaper than nearby neighborhoods that are even more desirable. In Silver Lake, he noted, houses sell for $600-$700 per square foot. In that regard, $575 looks like a good deal, he said.

The American Homes 4 Rent-Beazer deal continued a trend that has seen REITs and institutional investors buy up single-family rental homes en masse as a way of elbowing into a market traditionally ruled by Mom & Pop operations.

Most of the units being acquired are entry-level homes. Normally, many of them would go to first-time buyers, but they're being "shut out" of the market, says Richard Green, director of the USC Lusk Center for Real Estate.

"Investors can buy with cash, which is ideal for sellers who don't want to wait for loans to be approved," he said.

Rents in Southern California may be running out of room to climb.

The growth in apartment rents has slowed noticeably this year, according to new figures out Wednesday, the latest sign that housing is becoming too expensive for many Angelenos.

This dynamic is why Los Angeles often scores worse on housing affordability measures than more expensive markets such as San Francisco. There, the average rent hit $2,141 in the second quarter, but typical household incomes are nearly one-third higher.

Now these REITs must figure out how to earn an adequate return on their investments in a housing market that has seen significant changes over the past year.

"Five years ago, the yields were so good, you could still make a lot of money even if your management costs were high," said Richard Green, director of the USC Lusk Center for Real Estate.

The yields aren't as good now, he says. That puts more pressure on REITs and other investment companies to boost yields through more efficient management.

"We're in a place we've never been before. The very low vacancy rate says rents should go up. The affordability problem says they can't," says the director of the Lusk Center for Real Estate at USC.

Seeking to capitalize on the real estate recovery, developers are looking for sites close to job centers and entertainment, while also factoring in price, said Richard Green, director of USC's Lusk Center for Real Estate.

"The land is a little less expensive as you get away from downtown," he said. "You can offer rents that are a little lower and justify the construction costs."

Technology is one of commercial real estate’s greatest expenses, but it’s also one of its greatest assets, said panelists at last night’s 2014 Orange County Executive Forum here, hosted by the USC Lusk Center for Real Estate and Allen Matkins. The impact of technology on their business was one subject the panelists tackled during the evening as members took the industry’s pulse and discussed their greatest opportunities and challenges in the current environment.

Developers see a different kind of flexibility in building apartments over condos, said Richard Green, director of USC's Lusk Center for Real Estate.

"If you open your doors to a bad market, you drop your rents and get your apartments occupied," Green said. "If you are developing condos, you don't know whether there will be buyers around."