Florentina Sarac
Orange County has seen a dramatic decrease in new apartment construction. According to a report from Yardi Rent Café, the market doesn't even rank at the top of the list for new deliveries this year. As a result, apartment occupancy rates and rents have remained high. The apartments that will be delivered in the market will be quickly absorbed.
"Demand in Orange County continues to be strong, boosted by the high-paying jobs in business services and healthcare. New apartment supply is welcome as the occupancy rate continues to be high at 95.9% as of March, outpacing the national average," Florentina Sarac, a research analyst at Yardi Rent Café, tells GlobeSt.com. "This year's limited supply is bound to be absorbed relatively fast and this might have a certain impact on rent growth."
High home prices have ensured high apartment demand, and the low new apartment construction has created a limited availability of both for-rent and for-sale homes. "The market's high barrier to homeownership—only 12% of the total number of renter households can afford to purchase a home according to the California Association of Realtors—will keep the demand for rentals at a steady rate. So far, the main focus for developers in the area has been Anaheim-Central where the median age was 34.3," adds Sarac.
Orange County isn't the only Southern California market that is seeing a slow down in new construction deliveries. In fact, most Southern California markets are seeing a slow down in new apartment deliveries this year. However, Los Angeles and San Diego are still seeing significant new apartment deliveries, and as a result, those markets are seeing a slow down in rent growth. "New construction had an impact on rent growth that we cannot overlook, however, the demand in both markets exceeded supply, leading to a moderate rent growth in the past year," says Sarac. "In San Diego metro for example, the pace of construction has been steady in the past years, but lagged behind the level of development in other areas due to the state's strict zoning and regulations."
Still, rents are continuing to grow, and the slowdown in new apartment deliveries will likely translate to sustained rent growth. "The metro's rental prices have been rising, given the high demand brought forward by high-paying jobs in the tech sector and interest in the metro's universities," says Sarac. "Demand in Los Angeles metro has also been strong, due to the increasing number of companies relocating to the area and contributing to its robust economy."
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Kelsi Maree Borland
