Market Reports

By Mark Ventre, Senior Vice President, Stepp Commercial As it turns out, COVID has once again delayed hopes of a return to normalized operations for apartment owners. Just when it seemed the shackles that have hindered the ability to raise rents and recoup lost income would be removed, it now appears the light at the end of the tunnel has grown more distant. Fortunately, there have been positive indicators that the economic environment in Los Angeles for the first half of 2021 has improved considerably from the second half of 2020. According to the California Labor Market, the unemployment rate lowered from 17.9 percent to 10.6 percent a year ago. Apart from the third quarter of 2020, which experienced an enormous economic bounce back of 33.4 percent, the second quarter of this year has seen a GDP increase of 6.5 percent, one of the strongest since 2003. This is great news for a city that was particularly hard hit, considering the amount of hospitality and leisure jobs. However, Los Angeles has still lagged the nation with respect to rent growth in 2021. Average asking rents have improved by 3.9 percent since the beginning of the year, far below the national average …

By Dan Blackwell, Executive Vice President, CBRE Demand for multifamily properties in Orange County continues to show great strength. This is driven by steady rent collections and favorable interest rates as apartments in the region have performed well during the pandemic. As investors look to buy stable, income-producing assets in Southern California, the focus on the multifamily sector in our region has intensified. We have witnessed increasing interest from first-time buyers over the past few weeks, in addition to continued interest from 1031 exchange investors and those who sat on the sidelines during much of 2020. This demand is buoyed by willing lenders offering favorable interest rates in the low 3 percent range due to the area’s excellent rent collection track record. Most buyers are looking for 50 percent to 60 percent leverage, with in-place capitalization rates typically ranging between 3.75 percent and 4.25 percent, depending on location. However, given the limited supply, we are seeing buyers bid pricing higher and cap rates compressing for many assets.  Private investors continue to be the predominate buyers, mainly driven by the need for diversification and a stable cash flow. We are receiving more requests from LA County investors that may have sold a multifamily …

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 …

By Cray Carlson, CBRE With 2020 coming to an end, we look back at a year of much uncertainty, confusion and unprecedented restrictions. Yet amidst all that, the Inland Empire multifamily market has been going steady, continuing to thrive in spite of some substantial drops in sales volumes. Total multifamily sales of eight units and larger in the Inland Empire were $2.5 billion in 2018 and $2.1 billion in 2019. That compares with only $1.09 billion in 2020, as of October. We expect total sales volumes in the area could ultimately show a reduction of up to 40 percent for the full year. So, how is the Inland Empire maintaining its title as one of the strongest apartment markets in the nation? Collections A recent housing and employment study examined the ability for renters to make their rent payments. The Inland Empire led the category of households caught up on those payments. Respondents also indicated a high confidence level in their ability to meet their future lease obligations. Among the 15 metros surveyed, the Inland Empire ranked second. Vacancy Rates Rent vacancies have decrease in the Inland Empire to as low as 3.7 percent as rent growth has risen 6.2 …