Changes in Lifestyle Drive Multifamily Market

LOS ANGELES-Industry professionals gathered at the USC Casden Mulitfamily Forecast conference on September 24 to hear expert opinions about the California multifamily market. Pleasantly, and maybe surprisingly, the overall forecast was very positive. After welcome comments, Richard K. Green, the director for USC Lusk Center for Real Estate, gave a multifamily forecast using data from Reis Inc., which he described as “very thorough.” The data considered all property types with 20 units or more to offer the most comprehensive results possible.

Although Green declared the “market is the healthiest it has been in a long time,” he also noted issues with affordability and high rent costs. Average rents are currently at an all-time high at $1,440 per month in Los Angeles, while vacancy rates throughout Southern California are extremely low. He pointed to some submarkets in San Diego with vacancy rates lower than 1%. Typically, such low vacancy rates might warrant rent increases; however, Green felt that tenants might start sharing space if rents become too high. Slow job growth is connected to this issue. Employment in Los Angeles and San Diego is up 1.6% while Orange County, which has more college-educated jobseekers, is trending better with employment up 2.1%. For Los Angeles rents to stabilize, the city will need to gain 20,000 units per year. In 2013, Los Angeles gained 10,000.