LOS ANGELES (Business Wire) – Falling apartment rents across Southern California reflect the current recession as unemployed tenants move away or double up with friends or family while the affordability of foreclosed homes turns some renters into buyers. It's a trend that will continue this year, according to the latest survey of apartment markets in Los Angeles, Orange, Riverside, San Bernardino and San Diego counties conducted by the Casden Real Estate Economics Forecast at the University of Southern California's Lusk Center for Real Estate.
"In LA County alone, 41,000 people moved out of apartments last year – compared to the 29,000 who moved in over the past five years," said Delores Conway, Ph.D., director of the Casden forecast. "The dramatic changes in the economy are taking their toll on landlords, who are lowering rents or giving concessions just to keep their units occupied." She added, "Occupancy numbers dropped sharply, forced down by a record number of new apartments that came on the market in 2008 and the shadow supply of vacant condominiums and single-family homes for lease." Also, some renters became first-time homebuyers, snapping up foreclosed properties especially in the Inland Empire. "Bucking the trend, the San Diego apartment market has nearly full occupancy and rents that increased by one percent last year," said Conway.
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
- 2008 rents down an average of 3.8 percent
- Weak demand in Hollywood due to subleased condos competing with apts.
- Long Beach and San Gabriel remain more affordable than other areas
- Rents and occupancies should fall an additional percent this year but stabilize in 2010 as the economy recovers
Orange County
- 2008 rents drop for first time in 13 years; down an average 2 percent
- High home prices and tight credit supply keep more renters in the market
- 2009 job losses extend downward pressure on rents; Irvine's academic and medical base helps occupancies
- Rents may fall more than one percent this year as ample supply clears the market
Inland Empire
- 2008 showed largest drop in occupancy in 10 years;
- Rents fall 4 percent from high unemployment and abundant inventory, while foreclosures entice some renters to buy
- Vacancies to rise in 2009 with rents falling more than one percent
- Weak demand should materialize in 2010 as businesses seek affordable locations with an existing workforce
San Diego
- Apt. occupancies at 95 percent in 2008 as rents moved up one percent
- Market buoyed by military bases, biotech, high tech and universities
- Subleased condos downtown compete with high-end rentals
- One of nation's healthiest apt. markets remains So. Cal. standout with rents rising more than one percent in the next two years
Copies of the Casden Real Estate Economics Forecast can be ordered online for $75 at www.usc.edu/casden or by calling the USC Lusk Center for Real Estate at (213) 740-5000.