By Jack Stubbs
The multifamily markets in greater Los Angeles and Orange County experienced busy ends to 2022. The former witnessed record sales volume despite economic uncertainty, and the latter saw monthly effective rent declines for the first time in over two years according to Colliers’ two recent reports, the greater Los Angeles Q4 2022 Multifamily report and the Orange County Q4 2022 Multifamily report.
The two markets saw remarkably similar occupancy rates and average rent per unit. The greater Los Angeles multifamily market closed out the quarter with an overall occupancy rate of 96.3 percent – compared to 96.4 percent posted in fourth quarter 2021 – and an average $2,147 effective rent per unit. Likewise, the Orange County multifamily market posted an occupancy rate of 96.4 percent -a decrease from the 97.7 percent seen in fourth quarter 2021- and an average rental rate of $2,443 per month, respectively.
In greater Los Angeles, occupancy dipped 10 basis points quarter-over-quarter and is down the same 10 basis points year-over-year. Occupancy in Orange County, meanwhile, fell 60 basis points quarter-over-quarter and is down 130 basis points from 12 months ago.
Trends in rental rates painted similar pictures: in both markets, rents declined quarter-over-quarter for the first time in two and a half years. However, in greater Los Angeles, rents were up 3.3 percent year-over-year and are 9 percent above pre-pandemic levels. In Orange County, meanwhile, rents are up 2.7 percent from the previous year and are currently 23 percent above pre-pandemic levels.
Sales activity in the respective markets, meanwhile, saw different trajectories. Year-to-date sales volume in the greater Los Angeles area totaled $11 billion, up from the $185 million in 2021 – the average price-per-unit was $414,780, up nearly 4 percent from fourth quarter 2021. Perhaps most notably, the greater Los Angeles market recorded the highest yearly sales volume in its history – despite rising interest rates and overall economic uncertainty.
Conversely, sales volume in Orange County totaled $2.5 billion, marking a 26 percent decrease from 2021. The average price-per-unit in Orange County’s multifamily market was $497,722, which reflects a 4.3 percent increase from fourth quarter 2021. Though not as groundbreaking as the trajectory seen in greater Los Angeles – and despite a significant drop in sales volume – 2022 was still 30 percent above the five-year historical average of $1.9 billion, notes the report.
Looking at a historical comparison, greater Los Angeles’ multifamily market had a total inventory of 911,689 units in the fourth quarter, a marked increase of the total of 900,674 units in fourth quarter 2021. As of the fourth quarter, Orange County’s inventory totaled 262,307 units at the end of 2022, compared to the 259,448 total units of inventory a year prior. Greater Los Angeles saw 3,573 new units delivered, while Orange County had 908 units delivered.
In terms of what lies ahead in the construction pipeline, both markets have a healthy number of units under construction. There were 34,747 units as of fourth quarter 2022 in the greater Los Angeles market.
Some of the new developments slated to come online this year include Del Rey Properties’ 325-unit First Street Village property in Burbank,located at 325 N 1st St.; Oakmont Capital’s 205 unit Venue property, which is located at 3664–3688 Overland Ave. and 3667–3673 Keystone Ave. and is expected to be completed in fourth quarter 2023; and CityView’s 265-unit South Bay X project, located at 12850 Crenshaw Blvd. in Gardena. The project is expected to be complete at the beginning of 2025.
In Orange County, meanwhile, there were 7,692 multifamily units under construction as of fourth quarter 2022. Some of the projects underway include Prentice Park, a 603-unit project in Santa Ana, which is being developed by Quarry Capital and expected to be complete this quarter; developer Garden Homes’ large scale development The Trilogy at 2192 Martin in Irvine, which will comprise 876 units upon completion in the third quarter; and Boardwalk Investments’ Jefferson Centerpointe, which upon delivery in second quarter 2023 will comprise 418 units.