Ranking #14 in the 2025 Resonance Best World Cities report, Los Angeles continues to solidify its position among the planet's most influential urban centers. As "the planet's city of stories," Los Angeles is entering an exciting new chapter in its evolution, with the upcoming "Decade of Sport" bringing the 2026 FIFA World Cup and the 2028 Olympics and Paralympics—making LA the first U.S. city to host the Olympics three times
The Changing Investment Landscape
While Los Angeles remains a cultural and economic powerhouse, the investment landscape for multifamily properties has shifted dramatically in recent years. According to recent analysis of MSCI Real Capital Analytics data, Los Angeles County's share of U.S. apartment investment has declined from 5.4% in the 2010s to just 3.7% in the 2020s so far. Similarly, new apartment construction in 2024 represented only 1.1% of newly built units nationally—the lowest share on record in over 25 years and well below the preceding 10-year average of 2.5%.
This decline appears to be specific to Los Angeles rather than a regional trend, as neighboring Orange County and San Diego have maintained consistent investment levels. The shift raises important considerations for institutional investors evaluating opportunities in the Los Angeles market.
The declining share of investment can be attributed largely to regulatory developments that have created uncertainty in the market. Recent policies include a COVID-era eviction ban that lasted three years (resulting in one of the nation's lowest rent collection rates), a 5.5% transfer tax on apartment sales, and a recently passed county-wide eviction ban related to wildfire impacts that allows renters to self-certify financial hardship.
Downtown LA: Resilience Amid Broader Market Shifts
Despite these challenges, Downtown Los Angeles has shown remarkable resilience in its residential development. The Downtown Los Angeles residential market now comprises approximately 55,000 residential units, with an additional 27,000 units in the development pipeline. Of the existing inventory, 38,000 units are market-rate rentals and condos. The building typology is diverse, with 43% mid-rise developments, 33% high-rise towers, and 24% adaptive reuse projects. Despite the broader market concerns, demand has remained consistently strong in DTLA, with occupancy rates for established properties typically at or above 90%. (Source: DTLA Residential Report, 2023)
Adaptive Reuse: A Continued Bright Spot
One of DTLA's most innovative strategies for increasing housing supply has been its ambitious adaptive reuse program. In 1999, the city passed the Adaptive Reuse Ordinance, which streamlined the process of converting older commercial buildings into residential spaces. This initiative sparked the first wave of Downtown's renaissance.
From 1999 to 2008, adaptive reuse projects accounted for an impressive 87% of new residential inventory in Downtown Los Angeles. Historic office buildings, many dating back to the 1920s, were transformed into unique living spaces that preserved their architectural character while meeting modern residential needs.
The recently approved Downtown Community Plan (DTLA 2040) builds on this success by expanding adaptive reuse opportunities to include any building that is more than 25 years old. This change significantly increases the potential inventory of buildings eligible for conversion, potentially offering a path forward even amid regulatory challenges.
The Divergence of South Los Angeles
While DTLA has maintained relatively strong performance, South Los Angeles presents a different investment profile. Several factors make South LA worthy of consideration despite the broader market challenges:
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Lower Regulatory Spotlight: Some areas of South LA may experience less regulatory scrutiny and enforcement than higher-profile parts of the city.
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Relative Affordability: Land and property values in South LA remain more accessible than in Downtown, potentially offering higher returns that may offset some regulatory risks.
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Institutional Anchors: Major institutions like USC continue to invest heavily in the area, providing some stability amid broader market uncertainty.
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Transportation Improvements: The expansion of Metro rail lines has significantly improved connectivity, potentially insulating these areas from some market pressures.
Strategic Positioning in LA's Evolving Real Estate Market
Los Angeles presents a far more complex investment landscape in 2025 than it did a decade ago. The city's global prominence, cultural richness, and ongoing infrastructure investments create a backdrop of long-term value, while regulatory challenges have prompted a recalibration of risk assessment and return expectations.
For investors committed to the Los Angeles market, success will increasingly depend on neighborhood-specific knowledge, regulatory navigation expertise, and perhaps most importantly, a long-term perspective that can weather periodic regulatory interventions. The divergence between institutional and smaller investor activity suggests that different strategies may be appropriate for different capital sources.
Downtown Los Angeles, with its continued development momentum and the forward-looking DTLA 2040 plan, may offer more resilience than other parts of the city. However, all investors should approach the market with a clear understanding of the regulatory environment and its potential impacts on operations and exit strategies.
The city's global status and cultural significance remain undiminished, but the investment case now requires more nuanced analysis than at any point in recent decades. Those who can successfully navigate this complexity may still find opportunities in America's second-largest city, but with appropriately calibrated expectations and risk management strategies.