Real estate has long been a cornerstone of wealth building for everyday investors, but its significance extends far beyond individual portfolios. Industry giants like Costco are making bold moves into real estate, signaling a deep belief in its enduring value. In an era of economic uncertainty, real estate remains a stable asset class, driven by the universal truth that "butts will always need beds, and sleeping under a roof will always be treasured." Moreover, the persistent demand for affordable housing underscores its critical role in society, offering opportunities for developers and investors who leverage local resources and municipal incentives. This article explores how real estate, particularly affordable housing, is a strategic focus for major players like Costco and a vital tool for communities navigating uncertain times.
Costco, a retail titan known for bulk goods and low prices, is venturing into real estate with a groundbreaking mixed use development in South Los Angeles’ Baldwin Village. Announced in June 2024 and breaking ground in September, the project at 5035 Coliseum St. combines a 185000 square foot Costco with an 800 unit apartment complex, including 184 low income units, on a former hospital site. This first of its kind Costco anchored development, in partnership with Thrive Living, is a strategic move to address California’s housing crisis while capitalizing on real estate’s long term potential.
Why Real Estate? Costco’s investment reflects confidence in real estate’s stability. Rental income from the store offsets development costs and reduces reliance on subsidies. By integrating retail with housing, Costco creates a steady revenue stream, meets community needs, and generates hundreds of jobs in an underserved area.
National Implications: Analysts suggest this could become a national model, transforming underutilized urban land into thriving hubs. The project’s use of California’s AB 2011 legislation, which streamlines affordable housing approvals, illustrates how corporations can navigate regulation efficiently. Scheduled for completion in 2027, the development uses modular construction to cut costs and accelerate timelines.
Costco’s move reflects a broader trend among large corporations. Amazon and Google are investing in logistics and employee housing, showing that physical space is essential to long term growth. Real estate’s durability and demand make it a hedge against volatility, cementing its appeal far beyond the retail aisle.
Real estate’s value endures because it serves a basic human need: shelter. As the saying goes, "butts will always need beds." No matter the economic climate, people need a place to live. This fact underpins the asset class's long term appeal, especially when mortgage rates hover near 6.75% (Q1 2025, per CBRE).
Demographic Drivers: Population growth and household formation, particularly among those under 35, continue to drive demand. Florida’s surge in younger households, as reported by SVN, mirrors national trends. Freddie Mac estimates a 3.7 million unit housing shortage nationwide, reflecting a major opportunity.
Urban Solutions: The South LA project helps address housing scarcity and food access. By blending a Costco with rental units, the development forms a self contained community with amenities that foster social and economic resilience.
Affordable housing is more than a moral imperative, it is a strategic investment. The South LA project proves that aligning social goals with economic incentives can benefit both developers and communities.
Persistent Demand: As housing costs rise and homeownership remains out of reach for many, affordable rentals stay in high demand. Los Angeles’ 1.2 million dollar median home price makes affordable housing crucial. The 184 low income units in Costco's development help stabilize the community and provide consistent occupancy.
Municipal Incentives: California’s AB 2011 accelerates affordable housing approvals and reduces development risk. Thrive Living’s private financing approach shows that these projects can succeed without heavy reliance on subsidies. Similar policies, like Florida’s Live Local Act, support this model nationwide.
Community Impact: By dedicating 23 percent of its units to low income tenants, the development ensures inclusive growth and minimizes gentrification. Residents get stability, and the area gains long term sustainability.
Real estate comes with hurdles. The South LA project faced permitting delays and community concerns over traffic and parking. More broadly, 58 percent of multifamily developers faced construction delays in early 2025 (SVN), and insurance premiums continue to rise.
Innovative Solutions: Modular construction helps reduce build times and costs. Leveraging local policy tools like AB 2011 can streamline processes.
Risk Management: Diversifying across uses, retail and residential, spreads risk. CBRE's forecast of a 10 percent investment volume increase in 2025 underscores continued confidence in real estate, especially hybrid models.
Real estate is no longer just a path to individual wealth, it is a strategic pillar for institutions. Costco’s South LA project shows how mixed use development and affordable housing can meet community needs while offering stable, long term returns. With strong demand, government support, and innovative strategies, real estate remains one of the most resilient and impactful investments of our time.
