Upswing in Condo Conversions
USC Casden Forecast -- March 30, 2006
USC Casden Forecast Says Rents to Increase as Apartment Markets Tighten Across Southern California
High cost of homes and upswing in condo conversions are driving up apartment rents
March 30, 2006
LOS ANGELES (Business Wire) - Slow and steady gains in the overall Southern California economy will continue to push up apartment rents and occupancy rates that now rank among the highest in the country, 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). Overall, almost 97 percent of apartments in Los Angeles, Orange, Riverside and San Bernardino counties are currently rented and those occupancy rates should remain steady this year. Rent increases of six to seven percent can be expected in Los Angeles where the average monthly rent at the end of last year was $1,416. Orange County renters also can expect a rent hike of six to seven percent beyond the average monthly rent of $1,390. Inland Empire rents, which averaged $1,012 per month at the end of 2005, should rise about five percent this year.
"The recent run-up in home prices makes apartment living more desirable," explained Delores Conway, Ph.D., director of the Casden Forecast. "And the tight supply of land coupled with more condo conversions means fewer available units. That translates into higher rents and occupancy rates for the next couple of years." She added that apartment demand will benefit from the region's increased growth in trade along with an infusion of higher paying jobs associated with business and professional services.
The Forecast analyzes apartment transactions, new building permits, leasing activity and employment data using information from MP/F YieldStar, Property & Portfolio Research and other sources.
Los Angeles County Forecast
Demand for apartments will continue to be supported by the addition of 45,000 to 60,000 forecasted new jobs. LA County leads the nation in multifamily development with 10,900 new apartments under construction at the end of 2005. Constrained by available land, these projects will average only 57 units. By comparison, apartment projects in Orange County average 270 units. With the urban lifestyle appealing to more households, downtown Los Angeles accounted for one-third of all apartments completed in the county in 2005. Occupancy rates downtown -- currently at 98.2 percent - are the highest in the county and will continue to be tight. For West Los Angeles, rents are rising as the long-awaited jobs recovery puts positive pressure on the rental market.
The Hollywood submarket's makeover in Hancock Park, Los Feliz, Silver Lake and Park La Brea should keep apartment demand strong this year. The South Bay submarket is on a steady path to recovery, boosted by federal spending and accelerated growth in global trade. The Antelope Valley continues to be Los Angeles' most affordable submarket, with average monthly rents of $916 per month last year.
