Orange County’s well-diversified and growing economy, coupled with its high quality of life, attract residents nationally and internationally to the region. Prohibitive home pricing also intensifies the high barrier to home ownership, further supporting overall apartment fundamentals in the Orange County market.
Developers are targeting urban centers where they can transform the areas with Class A rentals. Anaheim’s Platinum Triangle, the Disney Resort, Convention Center Complex and surrounding area are undergoing an infusion of more than $5 billion that is redefining the area as a highly urbanized residential, entertainment and business hub. A similar transformation is happening at the Irvine Business Complex (IBC). In addition to these clusters, about 19,000 units are scheduled to come online over the next few years, particularly in the Class A product category.
Steve Heimuli, Lee & Associates Newport Beach
Tim Walker, Lee & Associates Newport Beach
Rents in Orange County rose 4.8 percent year-over-year through January, outpacing the 4.6 percent national growth rate. Renter demand remains elevated, fueled by a rapidly expanding economy and population gains. Large companies and startups alike are drawn to the market’s highly educated workforce as nearly 25 percent of residents have at least a bachelor’s degree. This reinforces the foundation for the multifamily sector’s rent growth in both “renter by necessity” (students/young professionals/blue-collar/subsidized households) and “lifestyle households” (renters by choice with discretionary income) renter base. Vacancy for Class A product will slightly increase in the third and fourth quarters of this year due to newly constructed inventory coming onboard in the lease-up stages.
Orange County’s diverse economy, high quality of life and prohibitive median home pricing will continue to favor an upward trend in apartment demand from a rental and transactional standpoint.
— By Tim Walker, Senior Vice President and Principal, Lee & Associates Newport Beach, and Steve Heimuli, Senior Associate, Lee & Associates Newport Beach. This article first appeared in the July 2017 issue of Western Real Estate Business magazine.