In September 2017, KPCC broke the news that the apartment vacancy rate in Downtown Los Angeles had reached 12 percent - three times higher than citywide average - as a construction boom allowed supply to outpace demand. In the wake of this, we cautioned that high apartment vacancy rates in Los Angeles apartments have proven to be temporary in the past, and limited only to neighborhoods seeing significant development. Now four months later, we've reached out to the real estate information firm CoStar to see how the Downtown rental market is doing as of early 2018.
According to CoStar Senior Market Analyst Steve Basham, the Downtown vacancy picture improved over the course of 2017, dropping from 12.4 percent in the first quarter to 10 percent by year's end. This improvement was even more pronounced at the high-end of the market - so-called four- and five-star properties - which comprise the bulk of new Downtown apartments. With over 1,600 new units opened during the first half of 2017, the vacancy rate for these luxury units spiked to nearly 16 percent - the highest rate since the recession. Nonetheless, Basham says that demand for these new units has remained healthy, and their vacancy rate is estimated at 10.3 percent as of today.
Despite the downward trend in the vacancy rate over the course of 2017, rents have remained flat, with little to no increases seen in Downtown. In comparison, rents for Los Angeles County as a whole grew 3.3 percent last year.
With all things considered, Basham framed these numbers as an encouraging sign for multifamily residential development in Downtown. Welcome news to developers, as an additional 7,000 apartments are expected to open through the end of 2020.
