Q4 2022 Multifamily Real Estate 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.
Known as the entertainment capital of the world, Los Angeles is the second most populous city in the US.
With a growth rate of 0.23%, Los Angeles’ population reached 12,488,000 in 2022.
The city’s unemployment rate reached 4.4% in December of 2022.
Los Angeles’ multifamily real estate market showed strong performance in overall sales volume and a robust construction pipeline, while occupancies and asking rents decreased quarter-over-quarter.
General Area Overview & Demographics
Los Angeles is the second most populous city in the United States. The city has a diverse demographic makeup, with 43.2% White/Caucasian, 9.9% African American, 48.5% Hispanic or Latino, 10.8% Asian, 0.4% Native American/Alaska Native, 0.1% Pacific Islander and 5.9% from other races. The city is one of the most expensive to live and work in as of Q1 2023.
Los Angeles, CA Median Household Income & Population
The median household income in Los Angeles is $60,200. This is slightly lower than the national average. The city’s poverty rate is 19.6% and its unemployment rate is 4.8%.
The median age of people living in Los Angeles is 35 years, with 22.5% of the population being under 18 years old and 12.7% over 65 years old. The city’s working-age population (18-64) makes up 64.8% of its total population.
Numerous universities are located in the city, including the University of Southern California (USC), California State University Los Angeles (CSULA), the University of California Los Angeles (UCLA), and Occidental College. The city also has many community colleges and technical institutes.
Popular tourist destinations in the city include the Hollywood Walk of Fame, Universal Studios, Disneyland, Griffith Park Observatory, Getty Center, and the famous Venice Beach Boardwalk. There are also many art galleries, museums, shopping centers, and outdoor activities to explore in the city.
Los Angeles enjoys mild temperatures throughout the year, with average highs of 75 degrees Fahrenheit in the summer and 65 degrees Fahrenheit in the winter. The city gets most of its rain during the winter months but is otherwise sunny and dry for much of the year.
Summary of Los Angeles Multifamily Real Estate Performance in Q4 2022
Vacancy rates for Los Angeles multifamily reached 3.7% in Q4 2022, an increase over its Q3 2022 numbers.
The West submarket posted the highest vacancy rate at 4.8%, while the North and South Bay submarkets posted the lowest at 2.9%.
Multifamily absorption reached 5,018 units in Q4 2022. This was a significant increase from Q3, which saw 2,470 units absorbed.
What are multifamily rents like in Los Angeles?
Average monthly effective rent for Los Angeles multifamily reached $2,079 in Q4. This was a $75 decrease in the average rate from Q3 yet still enough to burden many residents in the city.
The highest asking rent was in the Westside submarket at $2,777 per unit.
The average rent per square foot was at about $2.70.
Purchase & Leasing Activity
Sales volume for the year reached $10.9 million. The average sales price per unit was about $415,000.
The Westside submarket had the highest average sales price per unit at $535,000.
Notable Multifamily Real Estate Deals in Los Angeles in Q4 2022
There were several notable deals that took place for Los Angeles’ multifamily real estate in Q4 2022:
- THEA at Metropolis property sold 685 units for $504 million.
- The Vermont property sold 464 units for $235 million.
- Residences at Woodlake sold 276 units for $76.03 million.
- Rose Gardens sold 118 units for $31.7 million.
These are select examples among other activity.
New Multifamily Real Estate Development Activity in Los Angeles in Q4 2022
Approximately 3,580 units of new supply were delivered in Q4 2022.
New deliveries for the year totaled 6,212 units. The submarket with the highest number of deliveries for the year was Downtown/Central with 2,713 units.
About 33,480 new multifamily units were under construction in Q4 2022. The Central submarket accounted for nearly a third of these projects.
Market Forecast for Los Angeles’ Multifamily Real Estate Market
Vacancy rates and the number of units under construction are projected to remain steady moving into 2023.
Expect an increase in effective rents per unit for Los Angeles multifamily in 2023 as the Fed’s fight against inflation continues.
Sales volume reached historic highs in Los Angeles in 2022 but is projected to trend downwards from here on out.
Takeaways for Multifamily Real Estate Investors
Supply exceeded demand in Q4 2022 for Los Angeles multifamily real estate. Amidst rising interest rates, sales volume decreased by 35.9% in the second half of the year.
While the total number of units sold fell 11.1% year-over-year in 2022, average sales per unit rose 7%. While sales prices are trending positively, lower demand is important for potential investors to consider.
Do your research, stay diligent, and happy investing.
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