LOS ANGELES—In the next five years, 14,000 apartment units will come online in Downtown Los Angeles. The development boom, as we all know, is part of the ongoing downtown renaissance campaign to create a strong urban core in our city. According to a recent JLL report, there are currently at least 40 apartment projects underway and several major retail and hotel developments, all of which are making downtown one of the hottest submarkets in the country.

“Multifamily has always been a catalyst of development in Southern California, and it is primarily the focus downtown for that reason, and because downtown is a relatively easy environment to get buildings entitled and built,” Rob McRitchie, VP at JLL, tells GlobeSt.com about the influx of multifamily development. “Then, there is the macro focus that people really want to live in urban areas. It has been a shift over the past 10 to 12 years, and that is continuing. We are always undersupplied, so you could never deliver enough apartment units each year to keep up with demand; that is just a fact in L.A.”

According to McRitchie, 40 multifamily projects might be an underestimate. He says that there are 100 development projects currently in the pipeline and 90% of those projects are residential, with the vast majority market-rate, for-rent units. Even with all of these units in the works, McRitchie is not worried about a potential oversupply issue. “The vacancy is hovering around 5%, and 2015 is going to be a big indicator as to performance,” he says. “There are going to be a lot of buildings coming online in 2016 and 2017, so I think you will probably see a slow down to the point where developers aren't hitting the returns that they expected, but I do believe that it will all be absorbed. Developers might not like the way it turns out, but at the end of the day there are a lot of people still looking to live in downtown. So, I see a slight uptick in the vacancy rate, but it is not going to go north of 10%.”

The public transportation system has been a huge part of this equation, with an ever expanding rail line that will soon reach to Santa Monica and Westwood, changing the way we commute in Los Angeles and making it more attractive for people to live in a downtown core where having a car isn't necessary. McRitchie adds, “They are talking about opening a streetcar downtown, which will connect a lot of the various neighborhoods.”

But, when do we reach an overbuilding issue? Obviously, this can't be sustained forever. According to McRitchie, however, the development craze won't slow down any time soon. “You are going to see continued construction through 2017 as buildings get their financing packages get put in place and construction begins. Then, I think you will start to see a slow down with developers being a little more conservative,” he says. “For now, there are still 10 buyers for every seller, and downtown is probably the hottest market in the country right now. We are seeing an influx of East Coast money and foreign money, and I think that is going to continue. I don't see any signs of downtown going any direction but up.”