L.A.’s Multifamily Market ‘Winding Down’: Report
By Greg Cornfield December 7, 2023 3:49 pm
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Sluggish rent growth, slackening demand and a return to lower but historically average construction starts are dogging Los Angeles’ multifamily housing market, making it less appetizing for investors, according to a new report from Yardi Matrix.
“Los Angeles is feeling the full brunt of the economic slowdown more than other metros,” the report read.
During the first nine months of the year, Los Angeles investors traded 40 properties for a total of $1.2 billion, which is a 77 percent decline compared to the same period last year, due to unfavorable lending conditions. Of the completed sales, properties traded on average for $325,294 per unit, down 25 percent compared to last year’s figure.
On a year-over-year basis, L.A.’s rental rates were up only 0.2 percent, with the average at $2,592 per month in September (which is 50.2 percent higher than the average U.S. rate of $1,722). Only half of Los Angeles’ submarkets recorded positive year-over-year rent gains, led by Hyde Park, which is up 23.4 percent to $2,457.
Through the first three quarters, developers added 6,277 units across Los Angeles, representing a 1.3 percent expansion of existing housing stock, and a decrease of almost 16 percent from the same period last year. A total of 6,153 units broke ground, which is down 40.5 percent annually. However, that is an “expected correction,” after 2022 and 2021 recorded above-average increases in supply.
L.A. has 32,951 units underway and an additional 159,000 units in the planning and permitting stages. The largest property underway was the 700-unit South Park Tower in Downtown L.A. The 60-story tower is developer Onni Group’s largest project yet, and set to open in 2025. Downtown L.A. also remained the top submarket for development, with 4,346 units underway, followed by Westlake-North (1,970 units) and Koreatown (1,436 units).
Gregory Cornfield can be reached at gcornfield@commercialobserver.com.
