The Bay Area apartment market has been one of the worst-performing nationwide during the COVID-19 pandemic. Southern California performance, however, has been a little more varied.
Most California markets have been hit hard by the COVID-19 pandemic and resulting recession. The Bay Area has earned the undesirable accolade as the worst-performing region nationally. Southern California, where the apartments are a bit less expensive, also has some of the worst-performing markets, but as a region, is not hurting quite as badly. While Los Angeles and Anaheim have faltered in recent months, Riverside is a relative steady performer by several measurements including rent collections, rent change performance and apartment occupancy.
Looking first at rent collections, Riverside has one of the highest collection rates among the country’s largest metropolitan areas. Through September 13, 92.3% of renters in professionally managed apartment units had paid September rent in Riverside, compared to a national norm of 86.2%. Anaheim rent collections were also respectable at 91.6% and Los Angeles rent collections hit 88.8% by September 13.
Riverside was also a national top performer in effective asking rent growth, which reflects listed prices minus stated discounts. Effective asking rents grew 4.4% in Riverside in August. In addition to being the strongest increase in the U.S., that performance was also essentially in line with the 4.6% growth Riverside saw in August 2019.
On the other hand, in Los Angeles and Anaheim, rent growth has turned to cuts in recent months. Los Angeles operators cut effective asking rents 5% in August, a big difference from the 1.9% annual growth from last August. Anaheim logged rents cuts of 1.8%, also down from the 2.9% growth seen last year.
Riverside is one of the few major markets nationwide where occupancy has strengthened in the last year. Occupancy climbed 90 basis points (bps) year-over-year to land at 97.6% in August. Meanwhile, occupancy was at 96.5% in Anaheim and 95.1% in Los Angeles. Anaheim occupancy has dipped a mild 10 bps since last August, while the downturn in Los Angeles was much more pronounced at 150 bps.
Looking at demand factors influencing the apartment market performance, job losses have been severe across Southern California, but cuts in Riverside weren’t quite as bad as what’s been seen in Los Angeles and Orange County. This could be due, in part, to the Inland Empire’s strong base of distribution jobs, which have been less harshly impacted during the pandemic.
In the year-ending July 2020, Los Angeles shed 424,900 jobs, while Anaheim cuts were closer to 203,100 jobs and Riverside logged cuts of 144,700 positions. By ratio, Anaheim lost 12.2% of its workforce, Los Angeles saw a decline of 9.4% and Riverside’s employment base contracted by 9.5%. While these cuts are severe, they rank below the ratio of cuts seen in other markets such as New York, Boston, Newark, Detroit, New Orleans and Orlando.