On the demand side, those who purchase or rent these units can be broken into two groups. The first are young professionals, who want to live and work in the same area and who more often than not end up sharing a unit, especially when renting. "This coincides with the general demographic trend of people getting married later in life," Conway says. "There's this young group of people who are remaining downtown because they're not starting families and don't need better schools that are present in the suburbs. The 2000 Census, for instance, found that about 25% of all households are comprised of single people--that's a huge number."

The other group, she notes, are retiring baby boomers who downsize their homes and move into apartments to take advantage of the cultural and social amenities available in downtown areas.There are other, smaller population groups, too, including foreign buyers who relocate or buy second homes in the US. "People are moving downtown for a life experience. That makes multifamily attractive," Conway says. "Based on demographics, we expect that to continue."

Part of this trend has been the rise of transit-oriented development, especially given the traffic congestion and infrastructure issues that plague many major areas. Among the cities that have been encouraging this type of development are: Hollywood (with projects like Wilshire and Western on the Red Line); Pasadena, where developments are rising on the Gold Line; and Irvine, CA in Orange County, where the Platinum Triangle business area is centered around a transit stop.

While low interest rates and high construction costs made condominium development and homeownership more attractive, the tide seems to be turning. "Rents have gone up and condos have cooled tremendously, especially in Downtown San Diego," Conway reports. "You're actually seeing some reversions now, which means they're turning condos back into for-rent apartments. The vacancy rates in almost every big city in California are very low, many below 3%, which is amazing. On top of that, rents are rising significantly. Rents jumped 10% last year in San Francisco, 7% in Los Angeles and about 7% to 8% in Orange County. We're starting to see a convergence now between renting and owning, where both choices are becoming available to people who can afford them. The challenge, however, is to bring in more affordable housing. That's always a challenge."

While people once followed jobs, it appears that in many cases, jobs are now coming to where the people are. According to Conway, improving fundamentals and demand on in the multifamily market have come in tandem with improving economic conditions in many downtowns. "For example, the office vacancy rate in Downtown Los Angeles has really declined down from where it was two years ago and job growth has picked up," she says. "Companies are definitely moving back into the downtown areas because they see that they can have a labor force very close by."