Huge rise in apartment supply: despite record rents, residents come to NoHo Arts District.

Huge rise in apartment supply: despite record rents, residents come to NoHo Arts District.
June 11, 2007

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In some cases leasing is proceeding a little more slowly than was hoped, and property managers all note that, with so many new units on the market, competition is rising, but in general NoHo is proving that if you build it, they will come.

A steady stream of renters is signing up for the 700 new luxury apartment units that have come on the market since last year in the NoHo Arts District area in North Hollywood, willing and able to pay what are often record rates for the San Fernando Valley, and the streets of the neighborhood are slowly tilling with the footsteps of urban professionals as was initially envisioned.

Meanwhile, even more new apartments are on the way, and the area is beginning to attract the interest of institutional-grade investors who would never have considered buying in Noah Hollywood before.

There are growing pains--new properties are working out the bugs--and vandalism and graffiti are still in evidence, but for the most part, NoHo has moved headlong into the transformation promised when the Metro line made its first appearance.

"Up until a year or two ago, there had not been a lot of institutional investor interest in NoHo," said Greg Harris, a multifamily broker who runs The Hams Group of Marcus & Millichap. "But with this master-planned redevelopment, institutional investors are looking at it as much more of a core market."

With the opening of the Metro line, city planners and developers hoped that NoHo would be transformed, joining a growing national new Urbanism movement with self contained neighborhoods connected by rail and bus.

But as the development dragged on for years, it began to look like nothing would move North Hollywood from its worn and weathered state of disrepair.

The opening of two brand new apartment complexes, The Lofts at NoHo Commons and the Gallery at NoHo Commons, both offering luxury rental living at prices ranging from $1,540 a month to $2,700 a month, seems to have finally started the transition.

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Equity Residential, a publicly held real estate firm acquired Academy Village Apartments and is now renovating the 250 units there from top to bottom with new appliances, flooring and exterior landscaping.

JSM, the developers of The NoHo Collection, which opened its first building with 103 units in 2005, is in varying stages on an aggressive development plan to build another 600-odd units, with perhaps double that number in a later stage.

And brokers report that, while no agreements have been reached, properties such as Fairfield Properties' Gallery, which is being marketed for sale, are attracting a new class of investors.

The newfound supply of units is still a little ahead of the demand for some. At the Gallery, where about 30 percent of the units have been filled, the activity is somewhat slower than was hoped, in part because there were delays in opening. And at NoHo Collection, which had until recently been fully occupied, the occupancy rate has fallen to 90 percent.

"It has been slower for this time of year," said Dewayne McClanahan, assistant property manager. "Competition-wise, yes, there's more."

But at the Lofts, units are filling up at a rate of eight to 10 a week, beating expectations by about two units a week.

And even where leasing is somewhat slower, there is ample evidence that the market is fundamentally strong.

"We had a really busy month in May," said Kimberly Heaton, the Gallery's property manager. "Our traffic flow is consistent. With so much new product, I think it has luxury: High rent been a lot more competitive than we had hoped, but do I think it will be successful? Definitely."

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The newcomers are also beginning to change the look and feel of the neighborhood. Some report seeing a stronger police presence along Lankershim Boulevard in the evenings, new restaurants are opening and, slowly, more pedestrians are taking to the streets.

"From what I hear it's done a 360," said McClanahan. "We have people here who said at one point they wouldn't even walk their dogs in the street."

Some problems

Problems with auto vandalism and graffiti still linger, in some cases causing a lot of concern for tenants.

"We chose the area. because it looked safe," said Genard Eulatriz, who said he was one of the first tenants to occupy the Gallery. "It was secure and it was brand new and it had all the amenities. But about a month and a half later many people started complaining. A neighbor is infested with roaches. There was a break in with a T-Bird convertible. People are going to be moving out."

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The Gallery's new manager, assigned to the post not a week ago, doesn't deny that there have been some problems.

"The property was built near sewer lines and that sometimes causes certain types of bugs," Heaton said. "I met with an exterminator to work out a preventative program."

Vandalism is not unique to the Gallery. The Lofts has had some graffiti and a few isolated automobile break-ins. But, the property managers say, those things are not unique to NoHo, and they are to be expected in a neighborhood in transition. Neighbors meanwhile seem to be coping well.

"I was staying on Miracle Mile, and it was too congested," said Alex Evans, a commercial model who recently made the move to the Lofts after looking at six or seven different complexes in the area. "Some streets are desolate, and where it's desolate it could be gang infested, but for the most part, it doesn't bother me. It's quiet. I like the hardwood floors, and it's got a real good community feeling, maybe because it's so new."

As expected because of its proximity to the studios, the neighborhood is attracting a lot of entertainment industry professionals, but others too are moving in.

"I wouldn't say a majority are entertainment related," said Vanessa Propersi, regional manager at Alliance Residential Co., which manages the Lofts. "We have doctors, lawyers. There's definitely a market out there."

Editor's Note: Business Journal Editor Jason Schaff is a resident of the Gallery, at NoHo Commons.

BY SHELLY GARCIA

Senior Reporter