Beverly Hills, the California enclave known for its celebrity residents and Rodeo Drive boutiques, is luring wealthy individuals seeking real estate investments, driving up prices for trophy apartment buildings in the city.

A 24-unit multifamily complex sold in March for $7.5 million, giving its buyer a lower return than similar buildings in the U.S.

Buyers with high net worths are accepting lower and lower capitalization rates, a measure of yield in the real estate industry, for rental apartments in the wealthiest neighborhoods in the Los Angeles area. The Beverly Hills investor accepted an annual cap rate of 4.5%, more than two percentage points below the national average, said Hamid Soroudi, senior managing director at the Los Angeles real estate firm Charles Dunn.

"It seems almost a privilege to own these multifamily units in these areas, because they're not replaceable and seldom on the market," said Christopher Cooper, Charles Dunn's chief executive. "When these assets do come on the market, there is a bit of a feeding frenzy."

Nationwide, the average cap rate for apartment buildings slipped to 6.6% in the latter half of 2010, from 6.9% in the first six months, according to the research company Real Capital Analytics Inc.

A 29-unit apartment building in Bel Air — part of the Platinum Triangle of wealthy neighborhoods along with Beverly Hills and Holmby Hills — sold in March for $7.2 million.

That gave it a cap rate of 4.6%, according to Soroudi. The average rate in the Los Angeles area's richest enclaves slipped to about 4% during the first quarter, from 5% in mid-2010, he said.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.