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Tuesday, Oct 3, 2023

Westside Condos Head Into New Price Territories

Luxury vertical living has begun a westward march from downtown to the Westside as developers are betting that wealthy international and bicoastal buyers will pay more than $2,000 a square foot for the amenities and low maintenance that come with condos attached to hotel brands.

At least 800 ultraluxury condos are taking shape on the Westside, reaching for price points with few comparable sales in the area. But with many hitting the market around the same time, some agents are skeptical there will be enough demand, suggesting units could undergo price cuts.

“Some projects with crazy numbers will work. Some will fail,” said Hana Cha, managing director of new development at Beverly Hills brokerage Compass.

Projects in the pipeline include the 193-unit One Beverly Hills by Dalian Wanda Group Co., at the corner of Wilshire and Santa Monica boulevards, and due in 2020; Beny Alagem’s Waldorf Astoria hotel next door, which is opening June 1, with 110 condos planned for a later date; the Century Plaza Hotel and Residences in Century City, developed by Woodridge Capital Partners, which will open next year and include 331 condos and 394 hotel rooms operated by Fairmont Hotels; and Genton Property Group’s Four Seasons Residences, across from the Four Seasons Hotel in Beverly Hills, is set to include 59 condos at its opening later this year.

Some units in those properties could be priced as high as $4,000 a square foot, according to sources familiar with the developments.

There are around 100 more condos coming on line in West Hollywood that aim to scale the $2,000-a-square-foot price mark.

Looking east

Downtown might serve as a cautionary tale for those Westside projects, where an oversupply of luxury condo product has forced developers to make concessions on pricing in order to lure buyers.

Overall, there are 5,800 condos downtown, with an additional 2,800 under construction.

Still, the Westside has had a shortage of full-service, ultraluxury condos, according to some in the industry.

“There’s a dearth of development because of stringent zoning and a very vociferous anti-development population,” said Horacio LeDon, president of new development at Beverly Hills brokerage Partners Trust. “They’re wealthy and can afford to make a stink.”

But some developers have broken through those barriers in order to cater to an increasing number of people purchasing additional homes in Los Angeles, LeDon added in an email.

“Real estate collecting by (high-net-worth individuals), especially in the ultraluxury condominium space, has taken the world by storm (NYC, London, Monaco, Miami, China, Australia), so it makes sense that L.A. would get its due at some point given the lifestyle advantage it enjoys over all, if not, most of those cities,” LeDon wrote.

But Compass’ Cha is skeptical that the Westside projects will all achieve their target pricing.

“An 800-square-foot, 1-bedroom condo is $1.6 million,” she said. “Is that feasible? Maybe you can do that with 25 to 50 units, but can you do that with 500? That’s on the small end, too.”

Premium price

The median sale price in Los Angeles for towers rising higher than 13 stories is about $900 a square foot, according to San Francisco-based real estate consulting firm Polaris Pacific, so $2,000 would represent an 82 percent premium.

When pricing such luxury units, developers have looked to a handful of comparable sales at the few existing ultraluxury condo offerings on the Westside, including the 20-unit Montage in Beverly Hills; the 140-unit Century in Century City; and the 146-unit Sierra Towers in West Hollywood, which some real estate professionals consider part of the Westside. A unit at the Century sold for $2,500 a square foot in March, according to property records. A Montage condo sold for nearly $2,800 a square foot in November.

“There have been less than 10 deals in the last three years with these big numbers. All the developers on the Westside are looking at those numbers, thinking, If they can do that, then I can do that with my building,” Cha said.

Developers are justifying their sky-high prices with round-the-clock service and amenities that come with hotel branding.

“Attaching to a hotel brand gives you (an) approximately 20 to 25 percent premium,” said Mary Ann Osborn, managing director of sales and marketing for the Century Plaza. “It’s the amenities of hotels you can use 24 hours a day.”

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