Q2 2022 Multifamily Market Report: Los Angeles, CA
Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.
Multifamily real estate in Los Angeles, CA, experienced another salient quarter of growth in Q2 2022, with vacancy rates reaching all-time lows and monthly rents rising significantly.
Employment in Los Angeles expanded by nearly 20,000 jobs, with Amazon spearheading an attempt to increase its white-collar presence in Los Angeles and its neighboring metros.
This expansion of Los Angeles’s employment sector, coupled with Amazon’s magnified presence, is drawing more residents to the LA area, directly affecting its multifamily performance and further extending its trajectory of growth.
General Area Overview
Los Angeles is a large metropolitan area in Southern California. One of the most populous cities in the world with 4 million residents, LA is home to a diverse population and many areas of concentrated poverty.
The city is known for its summer heat and as an edge city, or urban center with numerous skyscrapers along the coastline.
In addition to being a center for business, retail, and entertainment, LA is one of America’s leading centers for fashion design and filmmaking, as well as one of the most active commercial real estate markets in the country.
Los Angeles Population Demographics & Household Income
Los Angeles contains some of the wealthiest residents in America, with a median household income of about $91,000 annually.
The city also has a large percentage of renters, as more than half (63%) live in rental units as of 2022.
Los Angeles is about 52% White, 8% Black, 15% Asian, and about 25% Other.
How much are apartments in Los Angeles?
The average monthly asking rent for apartments in Los Angeles as of Q2 2022 is about $2,200 to $2,300. This represents nearly a 6% increase in monthly asking rent from Q1 2022.
Year-over-year, this is nearly an 18% increase in monthly asking rent from Q2 2021.
The West Hollywood/Beverly Hills/Park La Brea submarket of Los Angeles posted a nearly 24% quarterly increase in asking rent to about $3,300 per month.
Class B and Class C multifamily properties saw the greatest increases in overall asking rents.
Vacancy Rates for Los Angeles Multifamily
Vacancy rates continued to tighten in Los Angeles as the county’s employment grew and renter-occupied homes increased.
The current multifamily vacancy rate in Los Angeles as of Q2 2022 is about 3.5%, yet another quarterly decline of about 30 basis points.
Interestingly, vacancy rates are tightening the most in areas of Los Angeles where rent is the highest, such as Downtown Los Angeles and West Hollywood.
The forecast for the rest of 2022 is that vacancy rates will stabilize amidst the delivery of new multifamily development projects.
Los Angeles Multifamily Net Absorption in Q2 2022
In keeping with Los Angeles Multifamily growth trends, multifamily net absorption also improved in Q2 2022, rising by nearly 65% over Q1.
Q2 2022 was the fourth consecutive quarter wherein net absorption increased and vacancy decreased in Los Angeles.
We forecast net absorption to align itself with growth in multifamily supply as new multifamily projects are delivered to Los Angeles in coming quarters, stabilizing vacancy rates.
The Pacing of Multifamily Rents in Los Angeles
Rents for apartments in Los Angeles have been increasing exponentially since the second quarter of 2021. Average monthly asking rents in Q2 2021 were about $1,500; now, average monthly asking rents in Los Angeles are nearly as high as $2,300.
This represents a 65% increase in apartment rental rates in Los Angele, and rents are forecasted to continue rising in Los Angeles through the end of 2022 to as high as $2,500 a month.
Employment & New Multifamily Developments in Los Angeles
Employment grew considerably in Los Angeles in Q2 2022, with mostly white-collar sectors experiencing the most growth: Nearly 37,000 white-collar workers were added to Los Angeles in Q2 2022, representing a 6% increase from Q1 2022.
Total employment is expected to continue to grow in Los Angeles throughout the rest of 2022 by nearly 100,000 jobs, a 2.5% increase from Q2 numbers.
While new multifamily development itself has slowed down, project delivery has accelerated in Q2 2022: about 1,750 new multifamily units came online in Q2 2022 alone, a massive year-to-date and quarterly increase.
Nearly 9,500 new multifamily units are expected to be delivered to Los Angeles by the end of 2022, nearly 35% more than what was delivered in 2021.
Notable Multifamily Sales in Los Angeles in Q2 2022
Some notable multifamily acquisitions in Los Angeles in Q2 2022 include:
- A 669-unit property purchased for about $220 million;
- A 300-unit property purchased for about $170 million;
- A 324-unit property purchased for about $135 million; and
- A 177-unit property purchased for about $30 million.
Year-to-date transaction volume has increased by nearly 28%; however, quarterly transaction volume is slowing down significantly.
Takeaways for Multifamily Investors
Like other primary markets in the United States, Los Angeles is experiencing consecutive quarters of record multifamily growth as rising interest rates and slowing capital markets squeeze prospective homeowners out of the market.
However, this growth is expected to moderate into the end of 2022 and into 2023. The cost of borrowing money is only expected to increase in coming months as the Fed battles inflation, placing further emphasis on current market availability and discouraging future multifamily development.
Do your research, stay diligent, and happy investing.
Methodology
All figures presented in this article are based on MyEListing.com’s commercial real estate listing data in corroboration with other freely available data and information covering the commercial real estate industry.
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