Lifestyle changes, including an increasingly bi-coastal community of entertainment employees and the economic recovery, are fueling a boom in the local luxury apartment market.
High-end apartment buildings that charge rents ranging from $1,000 to $1,300 per month, and more for two-bedroom units, are drawing interest from real estate investment trusts. At the same time, private developers are building luxurious rental dwellings with services and amenities that rival four-star hotels.
Perceptions about home ownership "have changed in the last five years," said Paul Jennings, co-chairman and chief executive of Public Communciations Services, a Los Angeles-based developer. "A lot of people got burned on real estate during the downturn, and demographics are such that people are much more mobile. They don't want to get tied down, and if they work in the entertainment industry, they may be bouncing back and forth to New York."
PCS's just-opened apartment complex, the Premiere at Sherman Oaks, illustrates the trend. The 372-unit residence has its own movie theater for watching dailies on film shoots, a concierge service, valet parking and volleyball courts, among other amenities.
With a majority of its units comprised of studios and one-bedrooms, the Premiere is expected to draw about half of its tenants from corporate clients and studios seeking temporary lodging. But the complex also includes 65 two-bedroom apartments geared to individuals who need long-term housing those units were fully rented in the first weekend of leasing.
"It's sort of a status building, and if you can afford these luxuries, why not?" said Myron Montgomery, corporate housing and leasing director.
To be considered a luxury apartment, buildings must be in prime real estate locations and have a range of amenities that may include tennis courts, health clubs, spas, dry-cleaning pickup and delivery services and washers and dryers and wood-burning fireplaces in the units.
Malik Corp. in Sherman Oaks has built eight such apartment buildings in the Valley since 1994 and currently has another five under construction. The company's developments, in Sherman Oaks, Studio City and Toluca Lake, range from eight to 30 units, and no swimming pools, but they feature such architectural details as drop ceilings in the kitchen, French doors leading out to patios, recessed lighting and ceramic tiles in the kitchen and bath.
About a month before construction is completed, Malik hangs out a sign to announce that the rentals, two-bedrooms at $1,325 to $1,350 a month, are available, "We've been leased up for every building when we open," said Wayne Burkamp, vice president and general counsel.
Another developer, Lincoln Property Co., which is working with Katell Properties on the mixed-use Warner Ridge site adjacent to Warner Center, expects to complete a 125-unit luxury apartment complex in the first quarter of next year. Its units will have a gym and clubhouse in the common areas, and washers and dryers and roof gardens in some of the units.
"The idea is meeting the demands of people who could buy a house if they had the down, or if they wanted to," said Don Henry, vice president of the Irvine-based development company.
Real estate professionals say the market for these apartments leans heavily toward single professionals who choose to rent, either because they don't want to maintain a house or because they want the flexibility to adapt to changes in their career.
"People are increasingly becoming renters by choice," said Laren Barr, senior vice president for strategic planning and communications at BRE Properties, a REIT that just purchased a luxury apartment in Warner Center. "They don't want to come home and mow the lawn or fix the toilet. They're not confident that they'll be in their position for more than a few years, so to make a commitment to a home is not always a good financial decision."
Others would prefer to rent in prime neighborhoods rather than own a home in less desirable areas. And still others, who may be able to afford mortgage payments, can't manage the down payment required.
"Everyone's leveraged to the max," said Scott G. Miller, a CB Richard Ellis Inc. vice president based in the Sherman Oaks office. "So it's a big deal to come up with a down payment. For successful people making good money, rent may be the only option because of the debt culture."
The industry doesn't track the luxury apartment market specifically, but Malik, which specializes in the field, estimates that people looking to rent in these buildings represent 5 percent to 8 percent of the population. And given the continuing growth in the economy, "it's not even close to saturation," Burkamp said.
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