If you've ever taken the 110 freeway through downtown Los Angeles, you've probably noticed the asymmetrical, 54-story building that houses the JW Marriott and Ritz-Carlton Hotels. But that fairly recent addition to the L.A. skyline — the tower was completed in 2010 — is also home to condominium owners who've bought into the Ritz-Carlton Residences development.
The upper section of the tower is filled with 224 condos, all located on the 27th floor and above. AEG developed the condos, and the Ritz-Carlton manages them.
According to Kimberly Lucero, vice president of sales and marketing at AEG, recent sales have been brisk. Only six penthouse condos remain for sale.
The recent spike in sales at the development could reflect a growing market of wealthy buyers eager to be near Staples Center, restaurants, museums and cultural centers such as the Walt Disney Concert Hall. But Lucero estimates that only about one-third of those buying at the Ritz-Carlton Residences intend to live there permanently.
“We have a third of people who live here full-time. A lot of them have moved out of their large, six-bedroom homes in La Cañada and have come here and made this their primary home. We have a third that have used them as second homes. They come here for games or for concerts or they work downtown or don’t want to drive home all the time. And a third of them buy them as an investment because they see the future opportunity in downtown,” Lucero said.
The overall number of people living downtown has surged to 52,400, according to the Downtown Center Business Improvement District's demographic study, with nearly 7,000 new residents since 2011.
Major national retailers including Urban Outfitters, Wal-Mart, Target and Whole Foods are all opening stores in the area.
But downtown has struggled to build its image as a residential destination, and things didn't always look so rosy for condo sales at the Ritz-Carlton Residences. Back in 2007, condominiums at the development were offered for sale, just before the great recession dealt a blow to real estate prices across the country. The first sale didn't close until 2011, according to Lucero.
“A lot of people waited back [then], especially our international buyers, kind of waited through the recession, and once the storm cleared, we came back, 2012, and we were strong," Lucero said.
Even as the effects of the recession recede, residential development in downtown L.A. still faces challenges, said Richard Green, director of USC's Lusk Center for Real Estate. He pointed out that, unlike Manhattan, skyscrapers in California have to adhere to strict earthquake codes, and that can make construction particularly costly in downtown L.A.
“When you get done with the construction cost of a luxury building, it’s more expensive than buying a really nice house in a really nice neighborhood that’s pretty close to downtown," Green said.
Also, Green said, those with enough money to buy a luxury condominium have other options.
"Even in Southern California, $2.7 million can get you a really nice house in a really nice neighborhood," Green said. "San Marino — you could buy a really nice house for a million and half, something like that."
Green said even though living conditions in downtown L.A. have improved over the last 20 years, the neighborhood still isn't in a position to charge a premium.
"It's still not the highest amenity place to live in the L.A. area. There are places with more bars and restaurants and theaters and so on," Green said.
At The Ritz-Carlton Residences, a furnished two-bedroom condo that's 2,222 square feet can cost $3.7 million.
Green estimated that for roughly $3 million you can get a 2,556 square foot house with four bedrooms and four baths, on a roughly 8,300 square foot lot in Beverly Hills.
But Mauricio Umansky, CEO of The Agency, which acts as a broker at the Ritz-Carlton Residences, said despite the smaller square footage, the condos are worth it.
“There’s no single-story house that you’re going to buy, where you’re going to get a gym, valet parking, concierge services," Umansky said.
The amenities at the Ritz-Carlton Residences include free breakfast, access to workout machines and a rooftop pool. Furnished units are available, with panoramic views of downtown L.A. and the San Gabriel Mountains beyond. Owners can program curtains to rise and music to turn on, just as they enter their condo.
Orthopedic surgeon and entrepreneur Steven Nagelberg was among those who decided it was worth it to make the move downtown. Nagelberg said he used to live in New York and missed the city life. After he and his wife became empty nesters, they moved out of their large home in the Conejo Valley and into a three bedroom condo at the Ritz-Carlton Residences two years ago.
He declined to say how much he paid for his condo, but said it has saved him a lot of time sitting in traffic, especially since he's a regular at Staples Center sporting events.
“People who have seats next to me, they actually live in Camarillo. And they say, ‘You can’t imagine the traffic.’ And I say, ‘Oh yeah, it took me two minutes to get to the game," Nagelberg said.
Southern California condo sales reach a record high
According to the San Diego-based research firm DataQuick, more people are considering condos in Southern California. Earlier this year, pent-up demand and not enough homes for sale helped boost condo sales, including those priced $800,000 and higher.
In Los Angeles County, there have been 1,530 resale condos that have sold for $800,000 or more from January to October. That's an increase of 84 percent, compared to the same period in 2012, according to DataQuick.
Chris Manning, a finance and real estate professor at Loyola Marymount University, said he believes there is demand for more luxury condos downtown. He said a wave of people moved downtown even prior to the recession.
"It's caused by higher cost of gas and commuting," Manning said. "When the recession hit, it really accelerated trend."
But there is a limit to how much people will pay to live there. The Agency's Umansky said the Ritz-Carlton top floor penthouses were originally priced from $3.5 million to nearly $10 million, but they had to drop those prices to a range from $2.7 million to nearly $8 million. He claimed that AEG had planned all along to start high and then lower the prices.
“Some of them were grossly overpriced, with the idea to not sell them until the very end," Umansky said.
Whether or not the price drops were part of a clever sales strategy or simply a necessity, AEG is predicting they will close sales on all of the remaining units by the end of the year.