Tim Steuernol
Southern California apartment rents are continuing to increase, and Orange County and the Inland Empire are leading the market for rent growth. According to research from NAI Capital, apartment rents in Southern California are up 3.1% year-over-year, with Orange County rents up 3.2% and the Inland Empire rents up 4.1%. By comparison, Los Angeles and Ventura rents are up 2.3% and 2.4%, respectively, placing Los Angeles at the bottom of the region for rent growth.
"In large part, the rent growth is due to the strength of the economy," Tim Steuernol, EVP at NAI Capital, tells GlobeSt.com. "We are continuing to see a tight labor market, and renters are continuing to see a lack of affordable housing. The gap between average rents and what someone would pay for a mortgage has helped to continue to drive rents. There is a lack of available housing throughout the region, and people have the ability to pay higher rents and want to live in nicer apartments."
This is the trend driving rent growth in Orange County, were for-sale housing prices are among the highest in the country. "In Orange County, it is a similar story. There is a huge shortage of housing and one of the biggest gaps nationwide between the median home price and average rents," says Steuernol. "Because there is a lack of availability of housing, rents are increasing. There has also been a decreases in construction of new apartments as well."
In the Inland Empire, however, the story is just the opposite. A bigger supply of affordable housing and an easier path to homeowners ship have fueled inward migration. The combination of population and job growth has benefited the local apartment market. "Population growth and the availability of jobs have helped to fuel rents along with the increased pressure to fuel rental housing," says Steuernol.
While rent growth may be slowing overall and particularly in the Los Angeles market, investors are still bullish, particularly with continued rent growth even in the mature part of the cycle. "I think there is always concern about a downturn, but we are in a strong market, interest rates are low, sales volumes are up, transactions volumes are robust and I think that we will continue to see a strong market at least through the end of the year," says Steuernol.
When asked if rents would continue to grow—or if there is a limit—Steuernol remained confident. "If we hit a recession, some of the top-tier class-A communities will be hit the hardest and we will still hit more concessions,," he says. "Class-B and class-C communities will probably maintain a healthy level of rents."
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Kelsi Maree Borland
