For several years, multifamily housing in the Los Angeles area has been scarce. 2018, however, is expected to bring a huge influx in new multifamily developments. It is estimated that new property investments will provide more than 17,000 new rental units this year alone.
With more housing units available, many prospective tenants are hoping to see lower rent rates, however, this is not expected to be the case. Instead, rental prices in the booming community are expected to continue to rise by an average of 6.3 percent.
Reason for Rent Increases
Developers are building properties that appeal to an affluent clientele. Instead of providing affordable, modest units, new properties are being built to lure in those who want more luxurious accommodations. Rents should reach record highs of $2,200 per month and greater this year alone.
Investors are also confident with the state of the housing market in the area. New workers continue to flock to Los Angeles, with 53,000 people joining the job market in the city this year alone. Even with higher rents, there is still a huge demand for luxury units that are close to the city.
Number of Vacancies
With so many new multifamily units popping up, the vacancy rate will increase. The current estimate is that vacancies will reach 5.2 percent. This is not concerning for investors because the number of people moving to the area will help offset this increase over time. Areas with higher rents will have more vacancies while those offering lower rents will see a decrease in available units.
Areas of Interest
Most of the new multifamily properties are being built near Downtown Los Angeles and Mid-Wilshire. This is due to the number of new jobs being offered in these areas. Other areas that will see more units built include Hollywood, Glendale, and Marina del Ray. These towns are expected to have lower rents, and thus lower vacancy rates.
There is also an interest to invest in new multifamily properties on the outskirts of the area, such as in Pasadena and Santa Monica. Confidence in the job market and higher yields for investors make these cities prime targets for new apartment units.
With a thriving job market and high consumer confidence levels, the Los Angeles area is ready for these new multifamily properties. Even though the units are expected to fill up over time, current vacancy rates will increase, as will rental prices. Those looking for high end, luxury apartments will find many new options in the booming city.