Multifamily Rent Rebound Continues in Los Angeles

Apartment rents in greater Los Angeles are continuing to rebound, with the average monthly effective rent hitting $2,220 in the second quarter.

The increase over the Q1 average of $2,207 marked the second consecutive quarter of modest rent growth following a decline in multifamily rates during Q4 2023.

The average effective rate has grown 11.5% since dipping below $2,000 in Q2 2020 when occupancy plunged during the pandemic. However, only 0.7% of that increase has been notched since Q2 2023, according to Colliers’ latest market report.

The occupancy rate in Los Angeles has held steady at about 95% for five consecutive quarters, coming in at 95.1 in the second quarter. Occupancy has risen 90 bps since the beginning of the pandemic and now is slightly below the 20-year average of 95.7%.

Deliveries outpaced construction starts in Los Angeles in the second quarter for the first time since Q3 2023. New supply totaled 3,887 units in Q2 2024, up from 1,985 the previous quarter. There are 30,090 units under construction, with the lion’s share in Downtown L.A., which has 7,658 units in the pipeline.

Year-to-date investment sales in greater Los Angeles in the first half of 2024 totaled $1.7B, a 32% decline from the first half of 2023. The average price per unit, $365K, represents a 5% drop over the same period.

The highest average sales prices were in the Westside and Hollywood/Mid-Wilshire submarkets at $448K and $443K, respectively. The two submarkets also notched the highest average monthly effective rents in Q2, Colliers reported, at $2,805 for Westside and $2,415 for Hollywood/Mid-Wilshire.

A University of Southern California report released in December projected modest rent growth across the six-county region through 2025.

USC’s Casden Multifamily Forecast predicts apartment rents will rise in the region between 2% and 4% through 2025. Also, the report projects that Orange County will maintain its position as the strongest rental market, with typical asking rents hitting a record $2,800 by the summer of 2025, according to a report in the Orange County Register.

Meanwhile, the forecast calls for below-average increases in Los Angeles, San Diego, Riverside and San Bernardino counties.

The USC report, compiled by the university’s Lusk Center for Real Estate, said landlords will face hard times as they try to replace low-interest loans coming due for multifamily properties in the next four years.

“As the industry takes time to sort out financing, new supply will dip lower and lower. Vacancy will drop, and rents will climb,” the report said.

The report projected that, in the summer of 2025, rents will average $2,306 in Los Angeles County; $2,049 in the two-county Inland Empire; $2,540 in San Diego County; and $2,671 in Ventura County.