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Study: LA Apartments Cushioned From Downturn

LOS ANGELES-Marcus & Millichap Real Estate Investment Brokerage Co. recently released its Apartment Research Report for the Los Angeles County area, which indicates that reduced construction and diverse employment have shielded the county's submarkets from the full force of the economic downturn.

By Peter Landau | Updated on February 12, 2002

LOS ANGELES-Reduced construction and diverse employment have shielded the county’s submarkets from the full force of the economic downturn, according to a recent report released by Marcus & Millichap.

According to the report: just over 1,000 apartment units will be constructed in the Downtown area over the next 12 months. There is practically no land available for new projects, so most new construction in this submarket consists of redevelopments or rehabilitations of existing buildings. Demand is expected to remain steady, keeping the vacancy rate relatively unchanged in 2002.

Lower-than-average rents and the submarket’s close proximity to the CBD have created enough demand to push the average vacancy rate to a low 2.9%. Rates that are well below the county average should allow this submarket’s rents to grow by an additional 4% this year to $953 per month. Rents have increased by more than 6% in the last year, despite the slowing economy. The average sales price per unit will stay the same this year, despite rents rising and vacancies remaining static. Lower-quality buildings and working-class neighborhoods tend to hinder investor enthusiasm for this market during a weak economy.

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