Inland Empire Multifamily Sales Volume Down, but Economics Stronger than Ever
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?
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.
Rent vacancies have decrease in the Inland Empire to as low as 3.7 percent as rent growth has risen 6.2 percent above a year ago.
Rents in the Inland Empire have always been lower than any of the other Southern California regions. With close to 200,000 existing apartment units in the Inland Empire, effective rents in the region are at $1,726 compared with $2,077 in San Diego, $2,144 in Orange County and $2,220 in Los Angeles.
Rent and vacancy change research shows suburban submarkets are outperforming urban ones. Urban areas have experienced the greatest market deterioration — essentially, effective rent declines and vacancy gains — in nearly all metros. The best performing suburban submarkets are largely those less affluent and with lower density. Limited affordable housing supply is one factor that’s keeping market conditions relatively tight in these submarkets. Conversely, higher-end suburban submarkets are not faring as well as the lower-density areas due to factors like price and competition from new supply.
Given the confluence of these factors, we expect continued strength for the Inland Empire’s multifamily segment and overall economy in the region this coming year.