Dramatic spikes in appreciation coupled with tight rent control in West LA markets such as Santa Monica and Venice continue to drive out investors in search of better ROE in other markets. Long Beach is continuously and increasingly capturing these renters and investors.
(ROE) Return on Equity = Net Operating Income/Equity
Return on Equity (ROE) ratio calculates the amount of return generated in a particular year on the total amount of equity invested (or trapped) in a property.
According to Bobby Peddicord the head of CBRE’s South Bay office due to the drastic cost of properties in the Santa Monica and West LA area investors and renters alike are pricing out and choosing the more affordable option of Long Beach. The price increases in Long Beach are steadier than those found in West LA markets which indicates that if the market were to slow then the rents and sales prices in Long Beach will remain steadier than those of the West LA region. Peddicord also noted that investment in the multi-family sector is increasing and so are the rental rates and sales prices of multi-family properties. John Loper, associate professor of real estate at the University of Southern California states that this is due to the cost-prohibitive nature of single-family residences making people stay in multi-family longer until they can purchase a single-family home. Loper notes that this is a key driving factor in the strengthening multifamily market