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USC Lusk Center Casden Forecast Sees Southern California Apartment Rents Bolstered by the Housing Downturn
• West LA and Hollywood rental markets keep their cachet
• Orange County mortgage industry woes cause short-term adjustments
• Inland Empire’s affordable rents attract workers region wide
LOS ANGELES (Business Wire) – The Southern California apartment market will continue to move forward at a healthy pace this year with occupancy rates averaging 96 percent across Los Angeles, Orange, Riverside and San Bernardino counties and rents rising an average of three to five 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). “Stricter lending standards following the subprime mortgage meltdown are causing many potential homebuyers, who now face a larger down payment and higher monthly payments, to find renting more affordable,” explained Delores Conway, Ph.D., director of the Casden Forecast. “As economic activity expands across the region, steady job growth and high home prices bode well for landlords,” Conway added. “Strong investor interest and favorable long-term interest rates should help sustain sales activity of apartment buildings in all markets even as more units are being built.” Apartment demand continued to increase across Southern California last year, with monthly rents averaging $1,470 in LA County, $1,472 in Orange County and $1,036 in the Inland Empire.
The Casden Forecast analyzes apartment transactions, new building permits, leasing activity and employment data using information from MP/F YieldStar and other sources.
Los Angeles County Forecast
Occupancy rates should remain high around 97 percent with rents increasing an average of 5 percent. Demand should continue to outpace supply with transit-oriented developments in Hollywood drawing strong interest. People attracted to the jobs and burgeoning cultural and dining scene in downtown LA will have more rental options this year with 2,430 new units scheduled for completion. The West LA, Hollywood, and San Fernando Valley submarkets will continue to shine with more than 6,000 units under construction. The South Bay and Long Beach areas are on a steady path to recovery with rising rents and tight occupancies thanks to escalating global trade at the Los Angeles and Long Beach ports.
Orange County Forecast
The overall outlook for the apartment market in Orange County continues to be positive with some short-term adjustments due to layoffs in the mortgage industry. Occupancy rates overall will remain high at 96 percent with rents rising 4 to 5 percent due to the resilient local economy and job growth in professional services and healthcare. With housing affordability at an all-time low and limited land for residential development, renting remains an attractive option. Irvine remains the epicenter of new development activity with 2,160 apartments under construction for delivery in 2007. New projects in Anaheim are likely to generate significant demand from renters.
Inland Empire Forecast
Just as the Inland Empire has been the Southern California location of choice for more affordable homes, renters are finding apartments more affordable there as well. A record 5,400 new apartment completions in 2006 kept rents in check with an average rental increase of only 2.6 percent. This year rent increases around 3 percent are expected due to the abundant supply of new units in the market. The majority of new construction in 2006 centered on Moreno Valley and Rancho Cucamonga - the nation’s seventh-fastest-growing city where rents averaged just over $1,200 a month. In contrast, the San Bernardino area is the most affordable place to rent in the Inland Empire with an average monthly rate of $835.
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.