LOS ANGELES-According to the latest research brief from Institutional Property Advisors, the economy is expected to exceed 3% of growth this year, the highest growth since 2005. This is followed by an impressive yearend in 2013 with GDP up 3.2% in the fourth quarter, boosting GDP growth in the final 6-month period to 3.7%—the largest 6-month period of growth since 2003.

Much of the growth is driven by renewed consumer spending, which is expected to increase by 3.3% this year. As a result, demand for retail space will rise 1.6%, bringing retail property vacancy rates down to about 6.6%. Multitenant buildings will also benefit with those vacancy rates falling to 8.5%. The boost in consumer spending will serve well, helping to balance out declining economic stimulus from the Federal government. IPA predicts the FED will close out quantitative easing by yearend.

The economic rainclouds, however, in 2014 will come from government spending and the housing market, the report says. Last year's government shutdown and sequestration led to a 90 basis point drop in the GDP with at least 30 basis points from the decline caused by the reduced work hours of government employees. The second potential issue comes from the housing market where increased housing prices and interest rates have priced out several potential buyers out of the market, “eliminating the viability of single-family homes as investment vehicles.”

Rising housing prices could, though, be of benefit to the multifamily market. Last year, the monthly rate of a median-priced single-family home exceeded average rental rates for the first time, only further fueling demand for apartment units. Due to this demand, nationwide apartment supply is expected to increase by 1.5% this year, while vacancy rates nationally are expected to drop about 20 basis points to 5.1%.

Los Angeles is definitely seeing this national trend. The downtown submarket currently has 5,000 market rate units under construction, according to the recent investment conference Opportunity Knocks at the JW Marriott. Likewise, Glendale is also experiencing a multifamily construction boom. The submarket has 2,000 units currently under construction.