Across the nation, multifamily assets continue to be a favorite property type for both investors and developers alike. This trend is no different in Southern California, where occupancy rates remain high.
According to third quarter multifamily market reports from Colliers, both Orange County and the Greater Los Angeles area have seen high levels of both occupancy rates and rents. Those reports showed that occupancy across the Greater Los Angeles area’s multifamily property has grown in the third quarter to 96.7 percent, while rental rates have increased slightly by 4.98 percent year-over-year to $2,148 per month on average. Similarly, in Orange County, occupancy in the third quarter of the year reached 97.2 percent and rental rates averaged $2,484 per month.
Despite these continued trends, both markets overall remain flat due to a lack of available space to build, according to Colliers’ Senior Research Director Matt Nelson.
“Like industrial, multifamily growth is limited by new developments. Greater Los Angeles is one of the densest metros in the country, and vacant land to build on is nonexistent. In addition to the lack of land, ever-increasing construction costs and a challenging permitting process make developing anywhere in Greater Los Angeles challenging,” he said.
However, developers continue to push out new product when possible. Currently, there are 33,500 apartment units under construction in Los Angeles. In Orange County, there are 6,688 units currently underway, according to the report.
Several large apartment complexes are nearing completion in Los Angeles. For instance, G.H. Palmer’s Ferrante, a development consisting of 1,150 apartment units, is set to be completed during the fourth quarter of this year. Another development, Venue by Oakmont Capital, will consist of 205 units and will be completed in the fourth quarter of 2023, according to Colliers.
In Orange County, Quarry Capital is developing Prentice Park, a 603-unit apartment project in Santa Ana. That project is set to be complete in the fourth quarter of 2022. Garden Homes is also working to complete the 876-unit The Trilogy in Irvine by the third quarter of 2023.
While developments struggle to take off, there have been no lack of investments made in the market over the last several months. In Orange County, the year-to-date sales volume has reached $2 billion with an average per unit price of $515,753. Since last year, the per unit price has increased by 7.3 percent, and in the past five years, it has increased by 55 percent.
Likewise, in Los Angeles, total sales volume has reached $8.7 billion this year, which is up 31.5 percent compared to last year. Additionally, the average sale price per unit is 6.4 percent higher than last year and has increased 43 percent in the past five years.
“In 2022, sales activity is the most robust in the South Bay, with a total volume of $2.1 billion, representing 25 percent of all sales in the County,” Nelson said.
Still, sales activity in both markets continues. In one major transaction that took place earlier this month, Chinese developer Greenland sold its 685-unit, 59-story THEA at Metropolis. The property, which is located at 1000 W. 8th St., was sold for $504 million, or about $735,766 per unit, to Northland.
Also this month, Chapman University announced its $160 million acquisition of a 250-unit apartment complex at 2045 S. State College Blvd. near the school’s Anaheim campus. The apartment building will be used as new student housing for the university and will be called Chapman Grand.
Over the next several quarters, the reports from Colliers suggest similar trends are likely to take place. Both markets, overall, are expected to continue seeing a significant number of renters as houses in both markets become increasingly difficult to buy.
“With interest rates at levels not seen in 20 years, Greater Los Angeles will remain a renters market as potential new home buyers were likely pushed out of the market when the fed started raising rates in 2022,” Nelson said.
