SOCAL MULTIFAMILY REAL ESTATE SNAPHOT ~ DECEMBER 2013 > TOO MUCH OF A GOOD THING?

November 30, 2013 on 5:19 pm | In Charts + Statistics, Curious, Experts Say, Fascinating Information, Market Snapshot, Rents, Trends, Uncategorized | 4 Comments

by Jodi Summers

Is the party over? The apartment market has been on an exceptional run for the past four years. During the Great Recession we stumbled through a for-sale housing market in tatters, a weak recovery in the labor market that created mostly middling jobs for young workers, and benign supply growth. Combine all of the lackadaisical factors and you’ve hit the recipe for impressive strength it the apartment sector.

As they always say, all good things must come to an end. The for-sale housing market  in Los Angeles County has again become vibrant…but that’s not the main use. Over-construction is.

For example, builders have completed another 1,400 rentals in the Westside Cities over the past year, representing a 1% rise in inventory. Research from Marcus and Millichap notes that the largest project to come online in the past year is Marina Del Rey’s Shores > 12 buildings, 544 units.

During the past year, vacancy jumped to 3.2% percent. Net absorption was negative > rents have peaked for the time being. Looking forward, experts expect Westside vacancies to rise to 3.4% in 4Q 2013. Average effective rents at developments constructed since 2000 dipped 5.3% year-over-year in the third quarter to $2,769 per month.

The trend toward excessive unit construction is a national phenomenon. New completions in the top 82 markets in the country averaged just 10,623 units per quarter in 2011 and 19,585 units per quarter in 2012. Over the first three quarters of 2013 new completions averaged 27,411 units per quarter. This is the highest quarterly average since 2009.

New completions in the top 82 markets for 2013 are expected to total roughly 124,000 units. 5,400 units were added in L.A. County. These amounts  is on par with the long-term annual average of +/-120,000…but just wait,  in 2014, new completions are expected to total about 164,000 units, well above the historical long-term average. Expect 9,000 units in L.A. County in 2014.

Although demand for apartment units will remain rather robust, it is unlikely the market will be able to absorb this many units, causing vacancy to increase. This would represent a pronounced change from the past four years, when vacancy was compressing rapidly as demand far outpaced a subdued level of new completions.

For more information please contact Jodi Summers and the SoCal Investment Real Estate Group @ Sotheby’s International Realty – jodi@jodisummers.com or 310.392.1211, and let us move forward together.

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http://www.multifamilyexecutive.com/multifamily-building/new-construction-threatens-multifamilys-good-run.aspx?dfpzone=home&day=2013-11-21&utm_source=newsletter&utm_content=jump&utm_medium=email&utm_campaign=MFEBU_112813&day=2013-11-28

http://www.socalmultiunitrealestateblog.com/?p=2603

http://www.multifamilyexecutive.com/multifamily-trends/nations-strongest-markets-some-weaker-than-others.aspx?day=2013-11-14&utm_source=newsletter&utm_content=jump&utm_medium=email&utm_campaign=MFEBU_112813&day=2013-11-28

http://affordablehousinginstitute.org/blogs/us/wp-content/uploads/lion_lackadaisical-300×225.jpg

http://www.potentash.com/wp-content/uploads/2012/08/sleeping-giant.jpg

https://www.marcusmillichap.com/services/research/webreports/LosAngeles/Apartment.aspx

4 Comments »

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  1. Prices in the Marina are on a sliding scale…and it’s weighing me down.

    Comment by DeadHeadFred — December 1, 2013 #

  2. goose down jacket…

    Jodi Summers = Multiunit Real Estate » Experts Say…

    Trackback by goose down jacket — December 8, 2013 #

  3. cheap lv…

    Jodi Summers = Multiunit Real Estate…

    Trackback by cheap lv — December 9, 2013 #

  4. An 8-acre parcel in Beverly Hills next to the iconic Beverly Hilton on Merv Griffin Way is once again changing hands.

    The Los Angeles Times reported Thursday that the site of the 62-year-old building which most recently housed the Robinsons-May department store a decade ago is back on the market.

    The property at 9900 Wilshire Blvd., “one of the most desirable pieces of real estate in the country,” the Times says, “has seen multiple owners who have so far been unable to bring a condominium complex designed by a famous architect to life.”

    In 2010, Hong Kong private equity firm Joint Treasure International bought the parcel for $148 million. Experts in the Beverly Hills real estate market suggest the parcel is now worth somewhere in the mid-$300-million range.

    The owners intended to complete an existing plan to build 235 condos on the site. It’s unclear why they are now selling it. It’s also unclear how much they want for it.

    A major selling point of the property is an existing condominium complex design by Richard Meier, architect of the Getty Center, which was successfully navigated through Beverly Hills’ torturous city planning process, according to the Times.

    Comment by L.A. Biz — May 1, 2014 #

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