Southern California's strengthening economy, continued immigration and shortage of new units will drive up the region's apartment rents by 6 to 8 percent over the next two years, it was projected today. In 2003, monthly rents averaged $1,300 in Los Angeles County and $1,260 in Orange County, according to the Casden Real Estate Economics Forecast, which was released by the USC Lusk Center for Real Estatecolor>. "We'll continue to see strong demand from tenants moving into Southern California, especially from young singles wanting efficiency units and larger Latino immigrant families needing three-bedroom apartments," said Raphael Bostic, director of the Casden Forecastcolor>. Bostic said the big problem is that there are too few units available for people to move into right now. "Cities need to be more aggressive about allowing higher density projects in urban areas, but unfortunately, neighbors often reject this approach," he said. The report analyzes apartment transactions, new building permits, leasing activity and employment data to produce forecasts of rent and vacancy levels. Although Los Angeles County is expected to have slow economic growth over the next two years, a lack of supply coupled with strong demand means rents will continue to rise, the study predicted. Rents are expected to increase slightly less than 6 percent this year, followed by another 1 percent jump in 2005, when average rents will increase to $1,400 a month, according to the report. "Consistent with the mismatch between household size and types of units being built, three-bedroom apartments will become precious over the next two years with rents for this type of unit approaching $2,400 a month by the end of 2005," Bostic said. Submarkets with significant populations of immigrants and lower-income renters such as East Los Angeles, the San Gabriel Valley, Long Beach and Central Los Angeles will see higher occupancy and strong rent growth through 2005, the study predicted. In contrast, the expensive West Los Angeles apartment market, which was affected by a loss of technology jobs in 2001, will not see rents rise again until early 2005, according to the report. Orange County's economic and job growth will accelerate through 2005, driven by the expansion of its key technology, engineering and communications sectors, the study predicted. Likewise, the county's apartment market will continue to grow, driving occupancy rates to almost 97 percent by the end of 2005, when the rent average will jump by 9 percent, according to the report. The submarkets of Newport Beach, Irvine and Mission Viejo will benefit from the county's rising growth, while Anaheim and Santa Ana -- two of the most affordable markets -- will remain strong, as newly created jobs coupled with ongoing immigration increase pressures on rents, the study predicted.
