The Los Angeles apartment market has already returned to pre-pandemic activity, according to the latest research from Marcus & Millichap. Leasing of apartments is at a 15-year height, which illustrates the strong need for tenants. Demand has been so healthy that unemployment has fallen to 4% and rents have risen 3% for the year.
Job growth is behind the market’s rapid recovery. In the second quarter, 89,000 jobs were added to the labor market. At the same time, 9,700 units were leased, and the county added 37,000 new households to Los Angeles County. Marcus & Millichap expects equally strong job growth in the second half of the year, and ultimately predicts that 250,000 jobs will be added to the market this year.
A new imbalance in supply needs also drives low unemployment and rising rents. The dynamics are the most serious in the luxury segment, where Class A job rates have fallen in all the major sectors of the Los Angeles market. While there will be 10,500 new apartment deliveries this year, only Greater Downtown Los Angeles, which includes Mid-Wilshire and Hollywood, reports an increase in supply. However, Westside Cities, San Fernando Valley and South Bay-Long Beach will see a 10% to 35% drop in new home deliveries.
The dynamics of rising demand and stagnant or declining new construction will continue to drive strong foundations for the housing market through the end of the year. Marcus & Millichap predicts that the vacancy rate will fall by 60 basis points this year and effective rents will increase 5.5%. Rental growth will offset the fall of 4.8% in rent last year and will reach a new record of $ 2,340 per annum. Month in average rents in Los Angeles.
Despite the strong foundation, investors have not yet returned to the market. Total trading activity fell by 25% in the first half of the year. The decline in activity was most marked in the $ 1 million to $ 10 million investment segment, which consists largely of Class B and Class C properties. During this time, property values in the market rose 4% to $ 298,000 per annum. Unit; however, the median area capacity remained at 4.4%.
Rental rent is a factor that can stop apartment investments. One recently examination from the UCLA Lewis Center for Regional Policy Studies and the Lusk Center for Real Estate found that Los Angeles County has $ 3 billion in total rent debt, and the City of Los Angeles has about $ 1.5 million in unpaid rent from the pandemic. Among those with rent debt, the average tenant owes $ 2,800 in unpaid rent. The proportion of tenants with rent debt worsened as the pandemic progressed.