Affordability, Jobs Drive Multifamily Residents to the High Desert

by Jeff Shaw

By Bob Basen, Executive Vice President, Coldwell Banker Commercial Real Estate Solutions

The High Desert’s multifamily market remained surprisingly strong during the pandemic. Historic low vacancies in the High Desert apartment market, combined with low cap rates in Los Angeles and Orange counties, have made this market a favorite for “down the hill” investors. With the exception of three substantial multifamily projects in Hesperia, there has been no real apartment development in the High Desert since the mid-2000s. 

The recently completed The Villas, a 96-unit, age-restricted project developed by Eagle Hesperia 55 LP, has had phenomenal success with a waiting list prior to completion. With the success of this project, there will be a second phase containing another 96 units. Frontier Homes’ Las Casitas Apartment Homes and the 200-unit West Main Villas, developed by Bruno Mancinelli, were also very successful with two-bedroom apartments renting for more than $1,600 per month. This is a number that was unheard of prior to these projects. 

With those kinds of rents, we can and should expect to see increased apartment development in the High Desert. Hesperia has decreased its development impact fees, which may have spurred the above-mentioned developments within that city. There are currently additional projects on the books in Hesperia and Victorville. With updated building standards implemented by Apple Valley, we should expect to see new apartment development there as well. This is something we haven’t seen since the mid-‘80s. 

Apartment trends in the High Desert are similar to other markets with smaller units and more amenities. The only exception is the demand for three-bedroom units, which is surprising when you consider the affordability of houses in this market. Projects outside of our market seem to focus on one- and two-bedroom units equally, with no further three-bedroom units in the pipeline. 

We expect the delivery of new units to continue as long as it remains a landlord’s market with historically low interest rates. How will the addition of all these new units affect vacancy rates? Only time will tell. However, the future looks bright with the news that Hesperia alone has about 7 million square feet of new industrial projects. These could create in excess of 7,000 new jobs, making it reasonable to expect continued migration of tenants from down the hill to the High Desert for more affordable rents and job opportunities.

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