Koreatown Market Overview
Multifamily
Koreatown has been a hotspot for apartment developers during the past several years, as the neighborhood has witnessed an ongoing evolution into a dense, dynamic neighborhood in the center of Los Angeles. It is one of the five largest apartment submarkets composed of Koreatown at the northern end, and Arlington Heights and Harvard Heights in the south. Average asking rents have been rising in the area since early 2021, and investors continue to acquire properties as sales activity stays strong. The pipeline is also robust, with 3,200 units underway, concentrated in high-end projects.
Vacancy & Rent Fundamentals
Like the Greater Los Angeles apartment market, Koreatown saw vacancies spike in 2020, getting as high as 6.5 percent at the beginning of 2021, representing the highest levels seen in the past two decades. Vacancies are now sitting presently at 3.8 percent and are expected to remain near record lows for at least the near term, as moderate supply additions are expected during the next several quarters.
Koreatown’s average asking rents of $1,860 per month are below the metro average of $2,190 per month. Considering the submarket’s position in the center of Los Angeles, the submarket is a relative value option for tenants comparing options in several other nearby neighborhoods. Average asking rates are up by 4.5 percent during the past 12 months. This is behind the increase of 5.4 percent seen across the Greater Los Angeles apartment market, but robust compared to historical gains in the submarket. Looking ahead, rent growth is anticipated to remain historically strong through 2022 and 2023.
Sales Volume
Apartment investment activity in the Koreatown Submarket was strong reaching $615 million, which is above the submarket’s 10-year annual average of $467 million. Market pricing per unit in the submarket is $370,000 per unit and is 10 percent below the Los Angeles metro average. Average cap rates are sitting at 4.0 percent, and are on par with the overall apartment market. The market’s concentration of lower-quality units drives the submarket’s lower average pricing on a per-unit basis, however, recent quarters have seen robust asset appreciation.
Construction
Koreatown has become a hotspot for development in the past five years, with 5,300 net new units added to submarket inventory during that time. Prior to this period, development activity was much more modest. There are 3,200 apartment units underway, equating to 5.4 percent of current existing inventory. 80 percent of the units underway are also in 4 & 5 Star projects. The largest project is the The Rise Koreatown, a building compromising of 364 units and is set to deliver at the end of this year.
