Q1 2023 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.
Los Angeles, known for its thriving entertainment industry, is home to major corporations such as Walt Disney Company, Warner Bros. Entertainment, and SpaceX, contributing to the city's prominence in the fields of entertainment, media, and technology.
The population in Los Angeles is 12.5 million with a 0.37% growth rate.
In Q1 2023, the Los Angeles multifamily real estate market dipped in performance thanks to increased vacancies, less construction activity, and falling sales prices.
General Area Overview & Demographics
Los Angeles, often referred to as LA, is a vibrant and diverse city located on the west coast of the United States. Known for its stunning beaches, iconic landmarks, and thriving entertainment industry, LA is a global hub of culture, business, and innovation, yet renters in the city tend to pay a significant portion of their income towards monthly rent payments.
Culture, Demographics, and Climate of Los Angeles
One of the defining features of Los Angeles is its sprawling nature. The city is vast and encompasses a wide range of neighborhoods, each with its own distinct character and charm. From the glitz and glamor of Hollywood to the artistic enclaves of Silver Lake and Venice Beach, LA offers a multitude of experiences for residents and visitors alike.
The city also boasts slightly more expensive Class A and B property rents than neighboring cities.
As for demographics, Los Angeles is a true melting pot of cultures and ethnicities. It is one of the most diverse cities in the world, with people from all walks of life calling it home. The population is a vibrant mosaic, comprising individuals of Hispanic, Asian, African American, and European descent, among others. The city's rich diversity is reflected in its culinary offerings, with a wide array of international cuisines available throughout LA's many neighborhoods.
In addition to its cultural diversity, Los Angeles is also a hub for the entertainment industry. It is the home of Hollywood, the global center of the film and television industry, attracting aspiring actors, filmmakers, and musicians from around the world. The city boasts numerous iconic landmarks, such as the Hollywood Sign, the Walk of Fame, and the TCL Chinese Theatre, which are synonymous with the glamor and allure of the entertainment world.
Moreover, Los Angeles enjoys a Mediterranean climate, characterized by mild winters and warm, sunny summers. This pleasant weather, combined with the city's natural beauty, including its stunning coastline and nearby mountain ranges, allows for a variety of outdoor activities year-round. Whether it's surfing at Malibu Beach, hiking in Griffith Park, or exploring the famous Getty Center, outdoor enthusiasts can find plenty to enjoy in LA.
Summary of Los Angeles Multifamily Real Estate Performance in Q1 2023
Vacancies for Los Angeles multifamily real estate reached 4.2% in Q1 2023, an increase over Q4 2022's numbers as well as those of Q3 2022.
Multifamily absorption in the city remained positive at approximately 1,374 units.
What Are Multifamily Rents Like in Los Angeles?
The average monthly effective rent for Los Angeles multifamily real estate reached $2,170 per unit in Q1 2023, a 1.9% increase year-over-year.
Average rents were highest in the Westside submarket at $2,794 per unit; rents were lowest in the East submarket at $1,759 per unit.
Purchase Activity
Sales volume for Los Angeles multifamily in Q1 2023 reached $1.4 billion. The Westside submarket posted the highest sales volume at approximately $456 million.
The average sales prices per unit sat at about $415,000, a 1.5% increase year-over-year.
Notable Multifamily Real Estate Deals in Los Angeles in Q1 2023
There were several notable deals that took place for Los Angeles multifamily real estate in Q1 2023:
- Olympus Properties purchased Angelene Apartments for $112.5 million at $628,000 per unit.
- OpenPath Investments purchased Portofino Townhomes for $67.5 million at $450,000 per unit.
- Xenon Investment Corporation purchased Westside Villas Apartments for $66.1 million at $584,000 per unit.
- Heven, LLC purchased Haven Warner Center for $54 million at $263,000 per unit.
These are select examples among other activity.
New Multifamily Real Estate Development Activity in Los Angeles in Q1 2023
About 33,367 new multifamily units were under construction in Los Angeles in Q1 2023.
The Downtown/Central submarket saw the highest number under construction at 10,555 units.
New multifamily supply in Los Angeles totaled 6,534 units, with the Downtown/Central submarket delivering the most at 2,625 units.
Market Forecast for Los Angeles Multifamily Real Estate Market
Sales volume is likely to remain lower than what was seen in previous quarters due to ongoing economic pressure and uncertainty.
Vacancies in the city have continued to increase and will likely keep doing so: So far, multifamily supply in Los Angeles has largely outweighed demand.
Takeaways for Multifamily Real Estate Investors
Investors should note that the number of vacant multifamily units in Los Angeles increased by 19.4%; sales also declined by about 37.5% year-over-year. The average sales prices per unit dipped 18.4% year-over-year.
These factors, coupled with high interest rates and inflation, are causing many to think twice about making any moves in the current market.
Do your research, stay diligent, and happy investing.
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