Nearly 4,500 Apartments Delivered in DTLA Last Year
The apartment deliveries were up 35% in Downtown Los Angeles last year, setting a new record.
Downtown Los Angeles’ apartment market is growing rapidly. Last year, there were 4,447 new units delivered in the Downtown Los Angeles market, a 35% increase over the previous year and a new record for the submarket, according to a report from the DCBID. With the new deliveries, the apartment vacancy rate increased 2.9%; however, rents remained flat at $3.22 per square foot and effective rents increased 1.4%.
“We could see the record coming. It was not a surprise to see that the number of units pushed up close to 4,500, especially when we saw the number of units delivered in the fourth quarter,” Nick Griffin, executive director at the DCBID, tells GlobeSt.com.
While the vacancy rate climbed as a result of the new supply, Griffin doesn’t have any concern about the strength of the market. In fact, he says that an increase in vacancy is expected. If you look at only mature properties, the occupancy rate climbs to 95%. We actually have discussed including the occupancy rate for mature properties. When you are adding as much new inventory as we have, it is natural that the occupancy rate dips. On day one, a new building is 100% vacant, and if it takes six months to fill up, there is a gap. If you look only at mature properties, meaning properties that have been open a year or more, the occupancy rate is 95%. That is the most indicative figure for occupancy. We think that gives a more accurate picture.
The strong rental rates are another sign of the market strength. Despite the increase in supply apartment rents haven’t dropped and effective rents have continued to increase to $2,686 per unit.
In addition to the strong rental market, condo sales were also strong last year. In the fourth quarter alone, there were 81 condo sales in the market, a 6.6% year-over-year increase. The for-sale activity is a sign of the long-term growth of the market, and an indicator that residents are committed to living and staying in the neighborhood. “There is latent potential for significantly more condo sales, if we had the inventory,” says Griffin. “We are focused on Perla on Broadway because it is the first project that is coming to market with a significant number of well-priced condos. That is going to be the project that really shows how strong the condo market is. If that does well then you will see more condo projects.”