LOS ANGELES—Oil/gasoline prices have risen sharply over the past several months, and with no end in sight to the political turmoil in the Middle East, the upward trend is likely to continue. So says the 2012 Casden Multifamily Forecast from the University of Southern California Lusk Center for Real Estate. But that should bode well for "multifamily product closer to the economic centers of Southern California," says USC Casden Forecast author Tracey Seslen.
According to Seslen, "farther-flung submarkets such as the Antelope Valley of Los Angeles or Outer Riverside/San Bernardino may see declining rents as residents move closer to their workplaces and attempt to lessen the cost of their commute."
Andrew Kirsh, a partner at law firm Raines Feldman LLP, agrees, telling Real Estate Forum that the rising price of oil affects the real estate market on multiple levels. "People have changed their commuting behavior as gasoline prices rise," he says. "Any savings that people used to achieve by living in cheaper submarkets, such as Palmdale or Riverside County, are now being offset by rising gas prices due to long commutes." As such, he adds, there continues to be a lot of demand in transitoriented districts.
In addition, Kirsh says, demand for Downtown LA is at an all-time high because of the ever-increasing cost of commuting. Because of increased residential demand for TODs or CBDs, "more retail, restaurant and entertainment businesses are being developed in these districts," he says.
Robert Vallera, SVP at Voit Real Estate Services, explains that gas prices will likely affect some neighborhoods depending upon two specific characteristics: an apartment's price point within the rental market and its location. "Because the ability to absorb higher commuting costs is related to income levels, the largest impacts should be expected in the lowand mid-priced communities that are the greatest commuting distance from major employment centers," he explains."
Multifamily demand is always changing, and there may be a slight decline in rents in certain specific submarkets due to rising gas prices, explains Julie Manthey, vice president of operations at Western National Property Management. However, she believes the decline will likely be minimal.
"While it's true that some renters may relocate to major markets to save on commuting costs, there are still many people working within various submarkets who don't commute," Manthey explains. "In addition, those who relocate due to rising gas prices will likely be a small group of individuals, and therefore this movement will have little overall impact on rents."
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Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.
