Los Angeles Multifamily Sales Volume Down 66%

Year-to-date multifamily sales volume in greater Los Angeles has dropped 66% compared to the activity in the first half of last year, plunging to $2.3B from the $6.6B in H1 2023.

According to a new report from Colliers, the average price per unit in the second quarter was $391K, down 8% YOY. A combination of rising interest rates and the new property transfer tax in Los Angeles are expect to keep sales activity light until the economic climate improves, the report said.

Occupancy dipped to 95.2%, a quarter-over-quarter drop of 40 bps and a drop of 110 bps in a year-over-year comparison, the fifth consecutive quarter occupancy has gone down in Los Angeles.

“With 31,065 units under construction, occupancy will likely trend downward with new supply coming online,” Colliers said.

On the brighter side, rents increased for the second consecutive quarter after dropping for the first time since 2020. The average effective monthly rent in Los Angeles is $2,179 per unit. Rents are now 11.2% higher than pre-pandemic levels.

More than 8,000 units were delivered in H1 2023, with the 4,682 units of new supply in Q2 more than twice the 2,225 that were delivered in Q4 2022. But demand, in terms of units absorbed, has sagged from the Q4 total of 1,392 to 872 units in Q1 2023 and 925 units in Q2.

Total multifamily inventory in Los Angeles grew to 921,882 units in Q2 from the Q4 2022 total of 907,650.

Several large multifamily projects are scheduled to be delivered in the next 18 months, including Mitsui Fudosan’s 438-unit 8^th & Figueroa apartment tower and AvalonBay’s AVA Arts District campus, a 475-unit campus. Both projects are slated to be completed in Q4 2024.

Oakmont Capital’s 205-unit Venue apartments will be delivered in the four quarter. CityView’s 265-unit South Bay X, Gardena campus and Mill Creek Residential’s Modera Argyle, a 253-unit campus will open in 2025.

The Westside and South Bay submarkets had the most investment sales activity, with sales volumes of $688M and $409M, respectively; together, the two submarkets accounted for almost half of all of the sales in Los Angeles. Westside notched the highest Q2 average monthly effective rents, $2,804, and the highest average sales price per unit at $500,000.

The occupancy rate in the Downtown/Central submarket have dipped to 93.4%, with another 9,050 units under construction. The occupancy rate in Westside is 93.9%, with 6,176 units under construction.

Cap rates in the submarkets range from 4.13% in the Burbank, Glendale, Pasadena submarket to 5.02% in Downtown/Central.