Resilient Southern California Apartment Market
USC Casden Forecast -- April 5, 2006
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USC Casden Forecast Sees Resilient Southern California Apartment Market in 2005
-Inability to afford high-priced homes drives increasing numbers to rent -Renting activity picks up with improved job growth
April 05, 2005
LOS ANGELES (Business Wire) - Average asking rents and occupancy rates in Southern California's multifamily markets will continue to improve at a steady pace with average rent increases ranging from three-and-one-half to almost six percent this year, according to the Casden Real Estate Economics Forecast released today by the University of Southern California Lusk Center for Real Estate (www.usc.edu/lusk). "The new supply of apartments has not kept up with demand from newcomers attracted to jobs in our diverse economy and the Southern California life-style," said Delores Conway, Ph.D., director of the Casden Forecast. "Apartment occupancies are at all time highs in Los Angeles, Orange, Riverside and San Bernardino Counties because of a steady stream of young professionals and Latin and Asian immigrants who cannot afford the average home along with relocated executives who choose not to get locked into a mortgage," she explained. Conway pointed out that Southern California's steadily growing and diversified economy sets the stage for increased job formation and more demand for apartments in the coming year.
For 2005, the average rental rate for a two-bedroom apartment should rise to approximately $1,500 in Los Angeles County, $1,520 in Orange County and $1,080 in the Inland Empire, according to data compiled for the Casden Forecast. The Forecast analyzes apartment transactions, new building permits, leasing activity and employment data to produce forecasts of rent and vacancy levels in Los Angeles County, Orange County and the Inland Empire. The analysis incorporates unit-level data purchased from M/PF YieldStar, Inc. with county economic data. The Casden Forecast was sponsored by Bank of the West, California National Bank, East West Bank, Pillsbury Winthrop LLP and Stewart Title.
Los Angeles County Forecast
Apartment rents increased 15 percent from 2001 to 2004 even though many renters took advantage of low mortgage rates and moved out to become homeowners. Despite the additional supply of vacant units, strong demand kept apartment occupancies high and put upward pressure on rents. Currently, there are some one million apartment units in the county with inventory growing at only one percent a year for the past five years. With high occupancy rates and increasing rents, the Los Angeles multifamily market is one of the most sought after in the nation as pension funds, real estate investment trusts and private investors buy available properties at record prices.
The average rent for a two-bedroom unit is the highest in West Los Angeles at $2,319, nearly double the price for the same unit in the Antelope Valley. For the rest of 2005, rents should increase almost 4% to an average of approximately $1,200 for a one-bedroom, $1,500 for a two-bedroom and $1,700 for a three-bedroom unit. Occupancy rates will remain tight as job growth picks up throughout the county. New construction will help meet demand in the downtown area and also in Santa Clarita where renters are attracted to upscale lower-cost units within commuting distance of Burbank and the San Fernando Valley.
