Los Angeles’ blossoming technology start-up industry, known as Silicon Beach, is spawning a real estate boom on the city’s Westside, a mostly affluent area known for housing film executives, star athletes and financial industry heavyweights.
In the past 12 months property in Venice, Marina del Rey and Santa Monica – areas dotted with hundreds of new tech start-ups – has experienced double-digit price growth and a dwindling supply of inventory. Homes are also spending considerably less time on the market and selling well above asking prices, according to estate agents.
The influx of internet wealth is swelling house prices in one of the most competitive and expensive property markets in the US. Observers say it is reminiscent of the real estate boom that swept Silicon Valley during the dotcom frenzy of the late 1990s. In turn, this is sparking fears of a property bubble not unlike the one that burst following the internet collapse of the early 2000s.
“Homes are selling very quickly and for more than listing prices,” says Gregory Bega, an estate agent with Sotheby’s International Realty. He recently listed for sale a three-bedroom home in Venice at $11.5m, which found a tech-industry buyer in less than a week. “The hyper sales pace means a much more competitive marketplace for buyers.”
The area known as Silicon Beach covers approximately a four-mile stretch west of the 405 freeway, along the LA coast. It includes the areas of Santa Monica, Venice and Marina del Rey, stretching as far south as Playa Vista.
Initially populated by dozens of smaller tech start-ups seeking to escape high rents and competition in the San Francisco Bay area, it has rapidly expanded to include offices of behemoths such as Facebook, Google and Microsoft. Google recently opened a new 100,000 sq ft campus in Venice and is negotiating leases on another 100,000 sq ft, according to commercial real estate agents. Microsoft has a 20,000 sq ft office space in Playa Vista with more than 100 employees. They join emerging companies such as social media video app Viddy and Hulu, the video streaming site.
The tech growth coincides with a sharp rise in start-ups across Los Angeles, where more than 700 computer and technology firms now operate, estimates Sean Arian, vice-president for emerging technology at the Los Angeles Chamber of Commerce. Startup Genome, a research project that compiles data on start-ups around the world, ranks Los Angeles third, behind Silicon Valley and Tel Aviv, among the world’s top start-up locations.
The median price paid for homes in Venice, Playa Vista and Marina del Rey rose 14.7 per cent to $917,500 in the fourth quarter of 2013 compared with a year earlier, according to figures compiled by DataQuick, a real estate information services firm. Prices in these areas are up 24.6 per cent since 2011.
“The market is up but there’s still room to grow,” says Kenneth Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley. Rosen says talk of a bubble is premature because home prices are only now approaching pre-recession levels. “The market is essentially regaining its footing after significant softening after the banking crisis,” he says. “Low interest rates and limited inventory are actually helping the market stabilise.”
Tami Pardee, owner of Pardee Properties, says the boardwalk community of Venice, with its eclectic atmosphere and sandy beaches, is a popular area for younger tech employees to live. Bobby Murphy, the 25-year-old co-founder of photo messaging app Snapchat, recently bought a two-bedroom house in Venice just blocks from the start-up’s headquarters for $2.1m, nearly double the median price of neighbourhood homes.
Pardee Properties is currently marketing a $4.2m property in Venice that has four bedrooms, a heated pool and hot tub. The contemporary home measures 3,658 sq ft and has floor-to-ceiling windows, hardwood flooring and a three-car garage.
Erin Alls, an estate agent at Maison International, estimates that about half of her clients are now connected to the tech sector in Silicon Beach. “It began with just a few buyers, but escalated pretty quickly as the economy expanded,” says Alls. “We’re now entering a period where demand is outpacing supply.”
Hilton and Hyland, an affiliate of Christie’s International Real Estate, is marketing an eight-bedroom, 13-bathroom property in Santa Monica for $18.75m. It sits near the ocean with a pool, spa and 950-bottle wine cellar. It will be auctioned on February 21.
In Playa Vista, where YouTube has offices, a new development with more than 3,100 homes is set to open later this year targeting young tech industry professionals. It will stretch over 1,000 acres and include six residential communities. Home prices range from $900,000 for apartments to more than $2m for detached single-family homes measuring up to 4,000 sq ft.
● Los Angeles is among the most expensive areas for real estate in the US
● The climate is mild with average temperatures of 14C to 22C
● In 2013, the crime rate for Los Angeles was the lowest for 20 years, with a drop of 4 per cent in property crime and 12 per cent in violent crime
What you can buy for . . .
$3m A two-bedroom home with a swimming pool and terrace in Venice
$5m A newly built three-bedroom property with a garden close to the beach in Marina del Rey
$10m A beachfront property with a pool and home fitness centre in Santa Monica