Los Angeles

The Los Angeles apartment market has a severe supply-demand imbalance, which has been a primary driver of record-low multifamily vacancy rates and rising rents. That trend, however, might be shifting. In the last three years, developers have delivered more than 37,000 apartment units in the market, and the new supply could be catching up with demand in the submarkets with the most development activity. The vacancy rate in Downtown Los Angeles, for example, increased to 9.2% in the third quarter, according to research from NAI Capital.

"If you look at the Downtown Los Angeles market, where we are seeing a lot of new construction, we are also seeing higher vacancy," Tim Steuernol, EVP in NAI Capital's multifamily services group, tells GlobeSt.com. "We are seeing an impact on rental demand, and that could eventually trickle into other parts of the Los Angeles market where new construction is taking place."

Downtown Los Angeles is an interesting case study for supply-demand dynamics in Los Angeles. The market has overwhelmingly accounted for new apartment construction in the greater L.A. market, and the vacancy rate has certainly increased; however, if you ask Downtown experts, the apartment vacancy has only increased because of the large number of new units delivered—not because of a lack of demand or absorption. "I think that makes sense," says Steuernol. "It is not totally clear, and only time will tell. I do think that overtime, the new construction in Downtown Los Angeles will be absorbed. There is still a huge need and demand for multifamily housing, and it feels like those units will be leased up. The question is at what rate will they be leased up."