“This is the kind of place that people want to live,” he says. “From an investment perspective, it is also a fabulous place to hold property for the long term. Capital wants to be invested in dynamic, well-diversified, and insulated markets. Irvine represents all of these.”
Watermarke Apartments and Townhomes is also in Irvine’s airport area. The project started delivering an inventory of 535 units in early 2003. Floor plans range from 620-square-foot studios to 1,500-square-foot three-bedroom units and two-story townhomes.
Average rents in Irvine sit at $1,200 for a one-bedroom, one-bath unit and $2,200 for a two-bedroom, two-bath unit. One-bedroom units at the Watermarke start at a $300,000 purchase price. A condo at The Plaza-Irvine starts at $500,000 and can top $3 million. In terms of trade activity and volume, however, Irvine cannot compete with central Orange County.
Center of the O.C.
The dense central cities of Anaheim and Santa Ana, and close neighbors Garden Grove and Buena Park, are leading the Orange County multifamily investment pack. These are the built-out cities that surround giant demand-generators such as Disneyland and California Adventure. The majority of their housing demand comes from service workers—a group that accounts for more than 30 percent of Orange County’s 1.5 million-plus civilian employees, according to the 2001 Census. This equates to tens of thousands of employees in the central county who, by economic necessity, must live close to their jobs. Renter competition for the area’s mostly 1950s- and ’60s-built B and C multi-family product is off the charts.
In Garden Grove, Pacific Property Co. just purchased Rancho Valencia, a 245-unit, Class B apartment complex built in 1969, for $37.5 million. The average 1,000-square-foot units make the one- and two-story project a unique low-density property for the market.
“Garden Grove has been at about 98 percent occupancy for the last six months,” says Pacillio. “After completing a minor repositioning at the project, we increased rents from around $1,120 to about $1,250 per month. This would normally drive occupancy down about 10 percent, but here we’ve seen almost no resistance.” In Orange County, where the average home price is $600,000-plus, only about 10 percent to 20 percent of its residents can afford to buy a home, Pacillio says.
For an average Class B apartment in downtown Anaheim, an investor can expect to achieve around $1,100 per month in rent. In the investment market, these units are trading at $140,000 per unit and at a 5.75 percent cap rate.
Nearby Santa Ana is experiencing similar success, gaining momentum from Anaheim and by way of its own bullish development. Overall vacancy in Santa Ana sits at 3 percent, and its value build-up is strong at an average of $130,000 per unit today, compared with $60,000 per unit just five years ago.
One of the most recent development highlights in Santa Ana has been Santiago Street Lofts, a transit-oriented live/work community that will provide ground-level work space topped with two stories of residential lofts. The 108 units range in size from 1,500 to 2,200 square feet. Among other amenities, the project is located next to the Santa Ana Train Depot. Developers Lennar and Urban+West+ Strategies expect to complete the project this year; individual units went up for sale at the end of March.