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Property values are rising faster in El Segundo than anywhere else in LA County

El Segundo saw its property valuation rise faster than any other city in the past year. Brian McStotts via Flickr

The coastal city of El Segundo has seen property values rise faster than anywhere else in Los Angeles County as tech companies look south of Silicon Beach for plentiful and affordable real estate. 

El Segundo’s assessed value jumped nearly 12 percent in a year, according to the 2017 annual report from the L.A. County Office of the Assessor. El Segundo City Manager Greg Carpenter said a burst of demand for commercial buildings is driving up prices.

"We have a whole district called Smoky Hollow which was a former light industrial district where people are purchasing those properties and repositioning them as creative office," Carpenter said.

El Segundo has traditionally been associated with older manufacturing industries, such as aerospace, defense and toy giant Mattel. Tech entrepreneurs looking for exciting beach vistas to locate their start-ups often bypassed El Segundo. The city has a beach, although a less celebrated one, that residents share with the Hyperion Sewage Treatment Plant.

But the diminishing supply of Silicon Beach real estate in Santa Monica, Venice and Playa del Rey has helped generate interest in their less pricy neighbor to the south.  Carpenter said last year, in particular, saw the arrival of some major business investments in the city, such as a health institute opened by billionaire physician Patrick Soon-Shiong and his biotech firm NantWorks.

But it hasn't only been interest from tech. The L.A. Lakers built a shiny new $80 million training center in El Segundo.

All of this activity is increasing the city's valuation. Under California's Proposition 13, properties are assessed at purchase price. But properties are being sold for much higher than for what they've been asssesed at for years. Also, when improvements are made to buildings, that increases the taxable value of the property. 

"Properties are being purchased and then improved so that’s really a compound effect," Carpenter said. 

John Lane, a senior associate at the CBRE real estate firm, said companies are also drawn to El Segundo's proximity to freeways and the airport, and its low tax rate.

"You’ve got a good city that cooperates with business," Lane said. 

Residential property values are also rising in tandem with commercial listings. Lane's colleague at CBRE Jack Levis specializes in the sale of multi-family housing, and said that landlords are able to command higher rents, which means a higher sales price.

"Investors are buying the cash flow of the building," Levis said. "If the cash flow is increased, the value of the building is increased as well."

Officials in El Segundo want to keep attracting new companies and residents, and they know that surf sells. 

To that end, the city’s renaming the stretch of Highway 1 that runs through town. Starting in January, Sepulveda Boulevard will be called Pacific Coast Highway.