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Los Angeles' Strong 2014 Multi-Housing Market to Continue in 2015

Tuesday, April 07, 2015

The Los Angeles multi-housing buildings and apartment market in 2014 had their strongest year since before the Great Recession, according to Axiometrics, with annual effective rent growth surpassing 5 percent for only the second time in the past 14 years. Employment and Population Totals

The entire Los Angeles area was strong, with rent growth in the Oxnard-Ventura area up almost 400 basis points to beyond 7 percent and the Inland Empire surpassing 5.5 percent. The rent growth rate also increased in Orange County, but at a more moderate pace.

Los Angeles job gain has been fairly healthy since the recovery with the strongest gains in 2010. Employment grew at a 1.9 percent rate in 2014, and is expected to remain above the long-term average (1997-2014) of 0.6 percent. Los Angeles has recovered all lost jobs in the recession. Population growth remains healthy, averaging 78,000 new residents per year since 2010, showcasing growing interest in multi-housing buildings in Los Angeles. Population growth is forecast to average 1 percent in Axiometrics’ three-year outlook.

Los Angeles Multi-Housing Development

New supply increased from 3,500 units in 2013 to 8,752 units in 2014, but rent growth and occupancy improved for existing stock. Another 9,500 units will deliver in 2015, showing the demand for multi-housing buildings in Los Angeles. Though the Westlake/Downtown/Silver Lake area will once again deliver more units than any other submarket, more than 75 percent of the new units currently under construction are located elsewhere in the market.

Multi-Housing Building Occupancy and Absorption

Los Angeles' multi-housing buildings' occupancy improved from 95.3 percent in 2013 to 95.9 percent in 2014. Orange County and Oxnard-Ventura sported occupancy rates above 96 percent. Axiometrics forecasts the occupancy rate for Los Angeles to average 95.7 percent during the next three years, one of the highest rates in the country, and for more than 23,000 units to be absorbed during that period.

Los Angeles Occupancy Los Angeles Completions and Net Absorption

Rental Rates for Multi-Housing Buildings

Los Angeles experienced 5.5 percent rental growth last year, pushing the effective rental rate above $2,000 per month for the first time. Rent growth is expected to moderate closer to 3 percent in 2015 as new supply catches up with demand. Axiometrics notes, “while our base forecast is for rent growth to moderate in Los Angeles, the market ended 2014 on a hot streak. Despite strong job growth early in this cycle, Los Angeles lagged behind most other major apartment markets in terms of rent growth. This is a market that has pent-up demand, and it could exceed expectations.”

Los Angeles Rental Rates Los Angeles Annual Rental Rate Growth

Contact HFF Los Angeles for more information regarding multi-housing properties on the market in this area.

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