The county's vacancy rate plummeted to 2.7% at the end of last year, according to a recent study published by Grubb & Ellis. The same report predicts a tightening to nearly 2% during 2001, as demand continues to outpace supply. "The apartment market in the Los Angeles Basin remains very strong as a result of continued strong demand and limited new construction," says Marc D. Renard, senior director of Financial Services at Cushman & Wakefield Inc.

The dearth of buildable lots has pushed prices to more than $75,000 per unit, according to the Grubb & Ellis report. New product will remain scarce, as about 1,500 units will be brought to market in Long Beach and approximately 2,300 new or adaptively reused market rate units will come on line in Downtown Los Angeles and Central City West within the next 24 months. "There is a tremendous shortage (of units)" says Howard Levine, president and CEO of ARCS Commercial Mortgage Co. LP, one of the Southland's biggest apartment lenders.

Even the cooling national economy has had little effect on LA's multifamily market. Rent growth has slowed somewhat, but Grubb & Ellis predicts that rents will continue to rise, albeit at a more moderate pace of 8% to 9%. "The recent cooling of the economy will not affect the apartment market," says Paul C. Krikorian, director of investment properties at Charles Dunn Co. "Many investors, discouraged by stock market declines, have reinvested those funds in real estate."