AvalonBay Navigates Challenges to Thrive in LA's Tough Multifamily Sector

One of the toughest areas for commercial real estate firms to operate is in Los Angeles, California, but AvalonBay Communities relies on a mix of tactics to navigate these choppy waters.

The metro comes with tougher rules and regulations than elsewhere in the country. For example, the Los Angeles County Board of Supervisors recently proposed to cap rent hikes at four percent for small property owners and five percent for luxury landlords.

Eric Ostgarden, vice president of property operations for the REIT, will speak at our multifamily event in LA in mid-October. His focus is on overseeing the metro area and he reports that it is starting to recover from the pandemic freeze on rent. In April 2023, tenants needed to resume normal rent payments to avoid the risk of eviction.

Ostgarden also said it faced some “challenges from the Hollywood strikes last year,” which lasted about six months.

“I think we’re through a big chunk of it,” he told GlobeSt.

“Last year there was a lot of movement but we still have a little bit of ways to go.”

Particularly, he said there’s been “a lot more pressure in urban markets.”

“Those have been the areas that have been hardest hit, and continue to be areas where, there’s a lot of price sensitivity, a lot of promotions that we’re competing with, etc. We’re all struggling to keep our buildings full there,” stated Ostgarden.

But suburban markets in LA such as downtown Hollywood and Burbank have been a bright spot for the real estate investment trust.

“The suburban markets have been performing really well. Occupancy is doing well,” Ostgarden said.

Currently, AvalonBay is focused on keeping occupancy rates as high as possible. The company has been looking at leveraging both technology and centralization.

On centralization, Ostgarden said: “We call them neighborhoods, where we have clusters of properties that are grouped together and taking on resident responsibilities, touring, etc.”

He added that with technology, AvalonBay is trying to “have a lot of new technology folks in our teams that, develop AI and other things that are helping assist with some of that centralization duties.”

Ostgarden admitted that it will be difficult to predict how California’s multifamily market will perform in the short term due to how the state legislates and regulates. But he’s a more optimistic about AvalonBay in general, which operated over 90,000 apartment units across the U.S., as of March.

“We have a pretty robust pipeline and just adding accessory dwelling units (ADUs) into spaces in our communities that are unused or just underused, like storage rooms, and amenity spaces that weren’t being utilized by residents is something that I would say that is going to be a big focus of ours over the next few years.”