“The Avenues” in South Redondo are a special place in this highly desirable beach city.
You will normally find an annual or semi-annual blog post breaking down The Avenue’s activity, especially with land opportunities and new construction. Unfortunately, the pandemic has thrown off the blog cadence, so it has been some time since my last post on The Avenue’s. For a refresher, here is my last post from February of 2020 titled “Latest Redondo Beach Home Data and Update on ‘The Avenues.’”
Much like the Tree Section in Manhattan Beach, Avenue home values are largely driven by the latest spec home sale.
Typically, I dissect the largest section of The Avenues, between Pacific Coast Highway and Prospect Avenue, since there is a lot more sales volume and it is the same comparable area.
West of Pacific Coast Highway is its another pocket which is highly desirable with its walkability to the Esplanade/Riviera Village.
And, East of Prospect is another small pocket that rarely gets a lot of press since it is the smallest, a little louder off Prospect Avenue, and has lower price points being farther from the beach.
The great thing about being on The Avenues East of Prospect is that normally the only through traffic are your neighbors (depending on which street) as most streets’ termite at a cul-de-sac. It is a sweet location if you ever have time to roll through.
Big Triple Lot Land Sale
In March of 2019, an older East Avenues home on a TRIPLE sized lot came to market asking $2.5 million. It closed in May of 2019 for $200,000 over its asking price at $2.7 million.
There was no doubt from the beginning that this property was going to sell to a developer who would subdivide and build spec homes. Effectively, this sale represented each lot selling for $900,000.
Compare that to The Avenues between Pacific Coast Highway and Prospect selling lots between $1.2 and $1.3 million at the time. It was a nice discount, but obviously carried risk because East of Prospect homes sell at a discount to other Avenues pockets.
It was a true “spec development” play that could pay-off handsomely or end in a complete flop.
The final result actually turned out to be a single or a double, if we are using baseball terms, but it is a great case study for the small submarket.
New Construction Results
The developer efficiently, and cheaply, got these homes out of the ground and on the market just 16 months later.
During the build, can you imagine the sweat the developer had to endure? In process of building three huge 4,000 square foot spec homes going up as a worldwide pandemic and economic shut down was taking place. I would need a strong drink to get through something like that.
If you look at the finishes of these homes, they are done very well, but on the cheap. It is likely the developer spent about $1 million on each home (about $250/square foot) and with soft costs, etc., let’s call it $3.3 million.
So, all-in it was about a $6 million investment for land and build.
Below are the three sales that they got done when going to the MLS in the fall of 2020 as real estate started to make a strong comeback here in the South Bay.
- 1018 Avenue A, Redondo Beach
- 6 beds, 7 baths, 4,282 sq. ft., 6,329 sq. ft. lot
- Sold Price: $2,685,000
- 1022 Avenue A, Redondo Beach
- 6 beds, 7 baths, 4,282 sq. ft., 6,329 sq. ft. lot
- Sold Price: $2,700,000
- 1020 Avenue A, Redondo Beach
- 6 beds, 7 baths, 4,063 sq. ft., 6,329 sq. ft. lot
- Sold Price: $2,700,000
After selling costs, the developer probably made around $500,000 per home or $1.5 million in total. Not a terrible day at the office and with leverage, it could be much better…(or much worse).
The real result here is not necessarily what the developer walked away with in profits, but how these sales will shape The Avenues East of Prospect.
These are large new construction homes, but three sales, which is a lot of volume for this small neighborhood. The bar has been set on value not once, not twice, but three times.
Price points from these homes sales will bring up the value of existing homes, perhaps constructed 10 years ago. They will also pull up smaller homes that could be considered land plays as well.
I’ll show you what I mean…
- 1027 Avenue A, Redondo Beach
- 4 beds, 6 baths, 4,359 sq. ft., 6,569 sq. ft. lot
- Sold Price: $2,800,000
This example above was clearly a much nicer home with a pool, but it only sold at a $100,000 premium before the three specs closed. With its high-level finishes, is it perhaps now worth $3 million just a year later?
- 1064 Avenue D, Redondo Beach
- 5 beds, 5 baths, 4,267 sq. ft., 6,354 sq. ft. lot
- Sold Price: $1,925,000
This existing 4,000 square foot home built in 1998 sold just below $2 million. Could the new spec sales give the owner confidence to invest $400,000 to make the home “like new,” and command close to $2.7 million or more? It is not out of the realm of possibility.
The above two examples are recent sales. What about a 4,000 square foot purchase made five years ago?
A rising tide brought by these sales definitely pulls up the marketplace in a positive manner.
Latest Double Lot Opportunity
It is probably a once in a lifetime opportunity to land a triple lot on The Avenues, but if you want the next closest thing, there is another “once-in-a-lifetime opportunity” double lot East of Prospect…right next door to the old triple lot. And, it is on the market now.
- 1016 Avenue A, Redondo Beach
- 4 beds, 2 baths, 1,542 sq. ft., 12,641 sq. ft. lot
- Asking Price: $2,499,000
This listing is the same play as the triple lot, and it is likely a developer buy. Only this time, they’re asking $1.25 million per lot which is well above the $900,000 price per lot set from two years ago.
That is a big push higher and if it sells, it will bring typical single-lot sales in this pocket of $1.1 million even higher…and it might even make larger homes even more positive on their resale values.
Developers are desperate for land to build on and sell into this crazy market strength, but this would be another spec deal that would require a serious sweat. You have to pay a large premium for the dirt and gamble that you can land $3 million per home.
It would be a big bet.
Conclusion
As you have seen with past Avenues blogs, Tree Section blogs, or anything covering new construction…you know how these homes truly drive all aspects of the market higher.
It is rare to see big bets on The Avenues East of Prospect, but this triple lot and spec resale result ended up being a decent win for the developer, and a huge win for residents of this small pocket.
If the double lot ends up selling for its asking price, you can expect this market to see an even larger jump in values if the developer can pull off two more home sales close to $3 million 18 months from now.
And lastly, if you are an opportunistic retail buyer, you may want to consider the double lot listing as a great spot to park your money, enjoy the back yard, and let time do the work for you with a nice, covered land play to build homes on later in the future.
Normally, these large lots that can be subdivided and pay off big time…if you have patience.
My money is betting on a developer acquisition, but here’s hoping a savvy retail buyer can snag it and profit down the road.
Richard Haynes
DRE: 01779425
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The Richard Haynes Real Estate ShowA leader in South Bay real estate for the better part of a decade, Richard thrives as an advisor to his clients with over $248 million in sales as a broker or investment principal at his boutique agency, Haynes. Richard is known for his keen local market insights which have been featured in the L.A. Times, The Street, and Forbes, along with his weekly South Bay real estate blog. [read more]