— By Kalli Knight of Colliers —
The Los Angeles multifamily market faces several headwinds, including rising expenses, the aftermath of recent fires, insurance exclusions and Measure ULA. These factors impact transaction volumes, leading many investors to remain on the sidelines.
However, Southern California and Los Angeles will continue to have strong fundamentals, attracting a unique pool of buyers. This includes qualified, high-net-worth family offices eager to take advantage of limited competition to acquire new construction at prices below replacement costs or favorable debt terms.
Management companies are increasingly critical in supporting property stabilization post-pandemic, with a growing urgency to enhance operations and increase net operating income. As construction loans mature, their impact on property stabilization is significant.
Though the concession rate of 0.7 percent is significantly less than the national concession rate of 1.1 percent, many developers now offer four to six weeks of concessions to lease properties and meet projected rents outlined in their financial analyses. Some developers have also opted for creative strategies, such as providing customized closets to attract renters at higher luxury price points instead of relying solely on weekly concessions.
Vacancy rates in the market vary, but have generally improved since 2024. They have dropped below 5 percent, with areas in the Valley averaging around 4 percent.
Fewer than 10,000 units were delivered in Los Angeles County over the last year. This limited supply has created greater renter demand than last year. The most significant renter activity comes from higher-income renters seeking Class A apartments. Despite this, the tech and entertainment industries contribute to some of the highest unemployment rates in the U.S. This makes ongoing population loss a concern, as LA has exhibited a steady decline over the past five years.
Still, there is promise on the horizon. Literally. La Terra’s state-of-the-art IntroBurbank project aims to transform the Burbank landscape by catering to entertainment-focused tenants with features like sound stages, podcast rooms and social media-oriented amenities. This project will provide much-needed Class A housing with LEED-Gold sustainability features.
Meanwhile, Magnum Real Estate’s 800-unit development, anchored by Costco, will not only deliver housing in a transit-oriented community, but create job opportunities and help address grocery store disparities in minority neighborhoods. This will hopefully encourage other developers to innovate while generating approved returns. CityView’s completion of Apollo will offer architecturally appealing workforce housing units, supporting the burgeoning job market in the South Bay area.
Looking ahead, the market’s future remains uncertain due to fluctuating interest rates, inflation, bank sales and the possibility of a recession. Buyers will likely find comfort in a more stable debt market and compressed cap rates, while sellers must gain insight into market trends and pricing to bridge existing pricing gaps. LA’s strong fundamentals continue to attract foreign capital, and high-net-worth family offices are seeking different investment returns that allow competition in today’s market.
Despite challenges in tax credit distributions within the current governmental environment, affordable housing providers remain optimistic about their investments. California’s enduring strengths in education, rental growth and weather will also allow the market to attract new investors in the coming months and years.
— By Kalli Knight, Associate Vice President, Colliers. This article was originally published in the April 2025 issue of Western Real Estate Business.