12 Mo. Delivered Units
12 Mo. Absorption Units
12 Mo. Asking Rent Growth
– 0 .0%
12 Mo. Sales Volume
$ 0 B
COVID-19 has upended what is typically one of the country’s most stable apartment markets. While vacancies hovered around 4% for most of the past decade, they’ve jumped to 6.2% as apartment demand contracted more quickly here than just about anywhere else in the nation in the early months of the outbreak. There were some signs of life in late 2020 and early 2021 as demand intensified, particularly for larger units in suburban areas.
The region’s inherent supply constraints will help mitigate the worst effects of the recession. The high costs of land, construction, and entitlements, combined with intense community opposition, severely limit how much housing is built. Outside of a few development hotspots like Downtown L.A., Woodland Hills, and Koreatown, most submarkets aren’t seeing much pressure from new supply. That is helping to keep occupancies at healthy levels in most parts of town.
While this isn’t a builder’s market, it is very much a renter’s market. About 50% of households rent their homes, one of the highest percentages in the U.S. In normal economic times, the imbalance between supply and demand keeps vacancies low and tilts the playing field in favor of landlords and owners. During previous slowdowns, that same imbalance has limited the scale of losses and aided the recovery once conditions improved.
The pandemic put an end to nearly a decaude of uninterrupted rent growth. Average rents fell for most of 2020 but did appear to be stabilizing in 21Q1. Recent losses are concentrated in areas near job hubs and on the Westside, however. As renter preferences shift, high- end 4 & 5 Star communities are posting sharp rent declines. Conversely, demand is holding up well in less expensive outlying submarkets, where larger units can often be had for less money. Rents in these areas are stable or even increasing.
Prior to the outbreak, domestic and international capital was pouring into the L.A. apartment market. Nearly $11 billion in multifamily trades closed here in both 2018 and 2019, leading all U.S. metros, and average sale prices were above $300,000/unit. The pandemic pushed some investors to the sidelines in 2020, but sales volume was still near $7 billion, showing that even a global health and economic crisis can’t totally quash the appetite for L.A. apartment assets.
After years of rapid price appreciation in the metro, growth stagnated in 2020. A 550-plus-unit portfolio of mostly suburban properties that sold near the end of the year reportedly received almost 100 offers before the trade closed. That level of interest in the midst of the pandemic is a testament to the structural advantages of the local apartment market.