Greetings,
This is Manuel Angeles with Exp Commercial.
Here is an update on the current Commercial Multifamily Real Estate Market in Los Angeles County as of March 10, 2024:
Los Angeles apartment market conditions appear close to turning a corner, shifting away from the supply/demand mismatch seen in 2022 and the first half of 2023. Renter demand during the past 12 months, 5,700 units, was below the 8,100 units absorbed annually, on average, during the past decade. Recent weak renter activity, particularly in the first half of 2023, was driven by economic uncertainty, the actors' and writers' strikes, and continued outmigration by residents. Demand was insufficient to absorb the 10,000 net new units completed, resulting in vacancy rising from 4.6% one year ago to 5.0%.
However, renter activity has improved since the second half of last year, with vacancy holding in a narrow range since June. Consumer sentiment has recently risen, inflation has tempered, and the strikes facing the entertainment sector have resolved. Higher-income renters seeking top-tier apartments have been the greatest drivers of activity. As a result of improved renter demand, asking rents, which realized losses in late 2023, reached a floor in December, with gains resuming year to date.
The construction pipeline comprises 23,000 units, representing 2.2% of existing inventory. The impact of supply in the near term will disproportionately affect locations in Greater L.A. with elevated construction activity. Around 45% of units underway are in five submarkets, accounting for around 25% of the metro's existing units. In contrast, other locations will face limited supply pressures. Thirteen of Greater L.A.'s 36 submarkets, which comprise a third of Los Angeles' apartments, have construction levels, as a percent of inventory, of 1% or less.
Based on conversations with local multifamily investment brokers, the increase in debt costs and tighter lending standards have impacted recent transaction activity. Several investment sales brokers have reported that buyers in many transactions expect anywhere from a 10- 25% discount relative to early 2022 pricing, given that higher debt costs make it more difficult to achieve targeted investment returns. Many recently sold properties are seeing pricing below what would have been achieved in early 2022.
Since 23Q2, the market has faced another headwind, an additional transfer tax imposed on property transactions above $5 million that began April 1, 2023 in the City of Los Angeles (see sales section for more information). Market-rate multifamily units in the city account for over half of all market-rate units in Los Angeles County.
The 320 county-wide transactions in the fourth quarter of 2023 fell well below the 620 properties that traded quarterly, on average, during the past decade. Dollar volumes during the quarter, $1.3 billion, were some of the lower levels seen during a quarter since 2011. The additional costs could suppress near-term transaction volume and add downward pressure to asset values within the City of L.A.
Here are several graphs illustrating the current multifamily market in Los Angeles County:
Full Los Angeles County Commercial Multifamily Market Report Here: https://d2saw6je89goi1.cloudfront.net/uploads/digital_asset/file/11...
Access Exclusive Commercial Real Estate Market Reports in The United States Here: https://www.manuelangeles.com/
Contact me for a complimentary market analysis and valuation report for your commercial property, along with up-to-date commercial real estate listings (on-market and off-market): https://api.leadconnectorhq.com/widget/bookings/maexp
Thank you.
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Best Regards,
Manuel Angeles
Broker Associate
CalDRE #01985856
Mobile: (323) 900-5258
Email: manuel.angeles@expcommercial.com
Website: www.manuelangeles.com
Address: 155 N. Lake Avenue, 8th Floor, Pasadena 91101
Exp Commercial of California, Inc.
CalDRE #02134436
Office: (855) 451-1236, ext 300
Website: www.expcommercial.com
Address: 2603 Camino Ramon, Ste 200, San Ramon, CA 94583
| Commercial Real Estate Brokerage: Multifamily, Retail, Office, Mixed-Use, Industrial, Hospitality, Self-Storage, Land |
