- LA rents to rise only 2.5 to 3 percent, higher in desirable West LA and Hollywood
- After several years of big rent hikes, OC market cools down
- More affordable Inland Empire rents vary widely across the region
LOS ANGELES (Business Wire) - Apartment rents across Southern California will rise slowly this year, with average increases of 2.5 to 3 percent, while occupancy rates remain at 96-97 percent, according to the Casden Real Estate Economics Forecast released today by the University of Southern California Lusk Center for Real Estate (www.usc.edu/lusk)."The Southern California apartment market is poised to weather the housing downturn and credit crunch as long as job losses are not too severe," said Delores Conway, Ph.D., director of the Casden forecast."Renting remains attractive when mortgages are harder to obtain for high-priced homes. Although the national economy is skating close to a recession, the apartment market is supported by demand for trade, regional economic strength, and higher paying jobs in healthcare and professional services," she added. Covering Los Angeles, Orange, Riverside and San Bernardino counties, the Casden Forecast analyzes apartment transactions, new building permits, leasing activity and employment data using information from MP/F YieldStar, Hanley Wood and other sources.
Los Angeles County Forecast
A median home price of $460,000 and tighter lending standards will continue to position apartments as a realistic housing alternative for many. Apartment occupancy levels should drop slightly this year. Renters have more choices with many newly built apartments and some condominium projects that have reverted to rentals.
With more than one million apartments, Los Angeles County will see rental increases averaging 2.5 to 3 percent with somewhat higher increases on the Westside and in Hollywood, Pasadena, Burbank and Long Beach. The average monthly rent of $1,580 is the third highest in California trailing only San Francisco and San Jose. Expect rents to stabilize downtown because so many new units have come on the market. The shadow market of houses and condos for rent will continue to grow as owners lease properties rather than sell at a reduced price.
Orange County Forecast
Despite job losses in Orange County, apartment demand picked up in 2007 with rents moving up by 4 percent on average and 6 percent in South Orange County. The overall outlook for the apartment market in 2008 is somewhat cautious as the region adjusts to employment contractions in the financial services and real estate industries. Health services, leisure and hospitality continue to grow, helping maintain the demand for apartments. Employers in Orange County benefit from an expanding pool of skilled workers and an average monthly rent of $1,550 that is attractive compared to parts of Los Angeles.
Rents should go up this year an average of 2.5 to 3 percent, with somewhat higher increases in Buena Park and North Orange County where supply is limited. By contrast, the large supply of new apartments in Irvine should lead to stable occupancies and limited rent increases.
Inland Empire Forecast
The increase in service jobs and the availability of new apartments in Riverside and San Bernardino counties translates into continued demand for apartments. With an average monthly rent of $1,104, the region remains affordable. Government and healthcare workers, accountants, attorneys, and business professionals make up the next wave of tenants to serve the growing number of residents and businesses. This year, renters face a 2 to 2.5 percent increase due to the large number of new apartments recently built and competition from the shadow market of houses and condos for rent.
Occupancies should stabilize above 95 percent.
Rent increases vary across the Inland Empire because its submarkets are quite diverse. Expect somewhat higher rent increases in the strong, trade-based Ontario submarket along with Southwest Riverside and San Bernardino where apartment demand remains healthy and supply is limited.
Copies of the Casden Real Estate Economics Forecast can be obtained for $75 by calling the USC Lusk Center for Real Estate at (213) 740-5000.
For more information, please contact:
Francie Murphy
(858) 350-5152 office
(858) 922-0079 cell