More apartments are coming.
A surge of multifamily construction powered better-than-expected gains in home building in September, according to new figures out Friday. The Census Bureau said housing starts climbed 6.3% from August, and through the first nine months of the year are running 9.5% ahead of 2013's pace.
Despite all the new construction, average rents across the Southland are projected to grow 8% over the next two years, according to a forecast released last week by USC's Lusk Center for Real Estate, a pace faster than last year's. In a market in which apartment vacancy rates hover around 3%, it's hard to build fast enough to push rents down, said Raphael Bostic, a public policy professor at USC.
"There's so much excess demand," he said at a panel discussing the forecast last week. "Prices will just stay where they are."
That dynamic is playing out in downtown Los Angeles, where more than 6,000 new apartment units are in development, according to figures from real estate brokerage Marcus & Millichap, yet average rents keep climbing. Many of the new buildings are at the market's high end. For instance, the Ava in Little Tokyo charges $2,200 for a one-bedroom unit; at the Emerson on Bunker Hill, which is aiming for an older audience, one-bedroom units start around $3,500.
It's also at work in other neighborhoods where job growth is strong. In Santa Monica, for instance, the rental market is soaring thanks to affluent young tech workers who are willing to pay extra to live near both the office and the beach.