Housing Shortage Registers in the Los Angeles Apartment Market, Seen in Full Occupancy and Soaring Rents
(December 11, 2000) — Apartment occupancy in metro Los Angeles continues to tighten, and shortages of available units are pushing up rents at a dramatic pace. According to the latest edition of M/PF Research’s Los Angeles Apartment Report, occupancy in greater LA reached 98.6 percent in 3rd quarter 2000, up almost 2 points from the year-earlier level. Furthermore, annual same-store rent growth, measuring rental rates at the same properties from one point in time to another, surged to 17.8 percent as of September.
The full occupancy and climbing rents in Los Angeles result from demand far in excess of recent completions. Product absorption during the 12-month period ending in September reached more than 17,700 units, compared to deliveries of only 936 units in the same time frame.
“The stock of desirable vacancies is now completely exhausted,” said M/PF Research editorial director Greg Willett. “Fundamental apartment demand drivers remain in good shape in this market.The metro is generating new employment opportunities at a pace of more than 80,000 net jobs annually, and the typical single-family home is priced well out of reach for most apartment renters.However, the biggest influence on actual absorption in the next year likely will be product availability.”
Barriers to new development remain considerable in Los Angeles.Available land is limited and expensive, construction costs are high, and a rigorous building approval process makes for a drawn-out development time table. However, construction is on an upswing compared to the minimal volumes of new supply added in recent years. Ongoing construction at the end of 3rd quarter totaled nearly 5,600 apartments.Pockets of building activity are seen in the Santa Clarita Valley and the West Lost Angeles cities of Marina del Rey and Santa Monica and along the Wilshire Boulevard corridor.Also experiencing renewed apartment development are the urban neighborhoods of Hollywood and Intown Los Angeles.
Apartment occupancy topped 98 percent in nearly all sectors of metro Los Angeles as of 3rd quarter. However, slightly lower occupancy just under 97 percent did register in the more remote towns of the Antelope Valley.
Monthly rents reached a norm of $1,100 as of September.The average surpassed $1,700 in the West Los Angeles area that includes upscale neighborhoods such as Beverly Hills, Brentwood, Westwood, Santa Monica, Malibu and Marina del Rey. Also posting rents well above the metro standard was the South Bay Cities submarket.
|Los Angeles Apartment Market Profile|
3rd Quarter 2000
|Annual Employment Growth||81,200 jobs|
|Annual Apartment Completions||936 units|
|Annual Apartment Demand||17,720 units|
Change in Past Year
|Average Quoted Rent
Change in Same-Store Rents
|$1,100 per month
M/PF’s Los Angeles Apartment Report is a quarterly report that includes data and analysis addressing the local economy and trends in apartment demand, supply, occupancy and rents. Information is summarized on the metro level and detailed for 10 submarkets.
Since 1961, M/PF Research has been the trusted national expert in apartment market research. M/PF is retained by investors, developers, owners and lenders to prepare project-specific market studies and to produce broader, strategic market selection analyses and reports. M/PF Research, located in Carrollton, Texas, is a wholly owned subsidiary of RealPage, Inc., a leading provider of property management software and web services.