Investors spent nearly $1 billion buying Long Beach area apartment buildings over a 12-month period, outpacing any other submarket in Greater Los Angeles.

The news comes from CoStar Group, a real estate analytics firm, which published its findings after compiling sales totals for the 12-month period ending March 31. Long Beach’s apartment sales, with submarkets in San Pedro and Wilmington, include a deal for The Current, a luxury downtown tower that changed hands for about $133 million last July.

CoStar also reported, however, that smaller deals involving private investors are the major factor behind Long Beach’s high sales activity. The upfront costs to buy a Long Beach apartment building are less than other coastal areas, and Long Beach investors also can expect a greater rate of return from new properties.

“You need to have very, very deep pockets if you want to go play in Santa Monica, or Beverly Hills or West Hollywood,” CoStar senior market analyst Stephen Basham said.

On average, Long Beach apartment buildings have sold for $260,000 per unit, CoStar reported. Buildings in places like Beverly Hills, West Hollywood, Santa Monica and other beach cities command prices greater than $400,000 a unit.

Rising rents and rent control politics

Buyers in 2017 spent $980.8 million acquiring nearly 450 apartment buildings, amounting to nearly a tenth of the Long Beach area’s total supply. The heavy sales activity can create upward pressure on rents.

“An investor can come in and maybe modernize the unit and bump rents pretty substantially,” Basham said.

Average rents for an apartment of any size in the Long Beach submarket stand at $1,430, and they have grown at a 3 percent rate over the past year, Basham said. For Los Angeles County overall, average rents are in the $1,825 range.

In Venice, an apartment can fetch rents approaching $3,000 a month, Basham said.

Long Beach is among several Southern California cities where tenants advocates are pushing to get rent control measures on future ballots. Inglewood, where Basham said rents have increased at a 5 percent clip to $1,240 a month, is another.

Petitioners in Long Beach have until July 30 to turn in required signatures to City Hall. Their proposal would generally limit rent increases to the lesser of the inflation rate or 5 percent. The Long Beach proposal would also restrict landlords’ abilities to evict tenants and commission a Rental Housing Board to enforce the prospective law.

One of the city’s leading rent control proponents said the measure is necessary to prevent Long Beachers from being displaced or even becoming homeless when rents increase.

“We’ve got to keep people in place,” Housing Long Beach executive director Josh Butler said.

Long Beach’s rent control supporters are not only making their case to renters. Butler’s also looking for support from homeowners whose children can’t afford to leave the nest.

“They see that rents out here are exceeding their mortgage,” he said. “Their kids are living at home because they can’t go anywhere.”

Landlords are already preparing to fight the measure. Keith Kennedy, president of the Small Property Owners Alliance – Southern California, said expensive rental markets like Los Angeles, Santa Monica and West Hollywood are among places where rent controls already exist, and he predicted Long Beach tenants would not benefit if rent control becomes law.

“History has always shown that when you price fix, you create less supply and more demand,” Kennedy said.

Kennedy proposed greater public or private support for first-time homebuyers’ programs as a superior method of tacking affordability problems. He also said if rent control creates a disincentive to investors, that would risk deteriorating Long Beach’s aging housing stock.

Nearly 60 percent of Long Beach’s housing supply is more than half a century old, according to city government.

“Those buildings will just turn into slums and at some point, you won’t be able to renovate them,” Kennedy said.

Beyond Long Beach

The mid-Wilshire area of Los Angeles had the second-largest sales volume of apartment buildings, with sales exceeding $800 million, CoStar said. The San Gabriel Valley, South Bay and the combined Studio City-North Hollywood submarkets rounded out the top five.

“It seems to be affordability that investors are chasing right now,” Basham said after referring to the San Gabriel Valley area sales.