The trend toward more workforce and low-income housing will be a very big part of Los Angeles’ future. Additionally, new and existing housing located near major transportation corridors will be in high demand amongst investors. The City of Los Angeles has proposed a 5-year housing plan with a $5 billion price tag to help provide more housing for those two market segments.
Los Angeles apartment fundamentals are expected to have softened mildly coming into 2009, though vacancy will still be one of the lowest rates in the nation. Predictions are that the vacancy rate will have risen slightly to 4.5 percent by year-end 2008, then remain unchanged this year. The era of vacancy in the vicinity of 3 percent is not expected to return.
Rent gains are decelerating from the invigorating pace of the past decade. This year, Los Angeles’ average asking rate is predicted to rise only slightly, approximately 0.7 percent, to $1,469 per month. In November, the 40,544-unit Beverly Hills submarket had an average asking rent of $1,909 per month; the Santa Monica submarket was at $2,404 per month; the 43,645-unit Wilshire/Westlake submarket at $1,308 per month; the 50,936-unit Hollywood/Silver Lake submarket at $1,468 per month; the Sherman Oaks/Studio City/North Hollywood submarket at $1,586 per month; and the 23,291-unit South Glendale/Highland Park submarket posted an average asking rent of $1,292 per month.
Downtown Los Angeles and Hollywood have been the hottest multifamily submarkets throughout the county. As Hollywood and downtown begin to attract more residents, the demand for housing has also gone up. In July, Chandler Partners will complete the 159-unit Gardens At Wilshire at 635 S. Hobart Blvd., and another 220 units are projected to deliver during fourth quarter 2009. South Group will deliver 969 condominium units, and another 394 apartments by Holland Partners are expected to come online in 2009.
The California economy has stalled out and will be in the doldrums for the near term or maybe even longer. The latest forecast from Moody’s Economy.com predicts a loss of just 18,900 (0.5 percent) jobs in 2008 for California, followed by a modest recovery of 23,850 (0.6 percent) in 2009 — far less upside and downside than in the recession of the early 1990s.
The bright spot is that Los Angeles is becoming affordable again, and Moody’s Economy.com predicts the county’s population will rise by 62,000 persons in 2008 and by as much as 108,000 by 2012 after nearly stagnating during the 2003 to 2007 bubble. The strength of the multifamily segment is directly tied to the demand for rentals as the housing market declines.
— Rich Johns of Ramsey-Shilling’s Multifamily Investments division is based in Los Angeles.