Vacancy Continues Declining in the Top-Tier Multifamily Segment
By Ryan Patap
CoStar Analytics
June 24, 2024 | 2:09 P.M.
As Los Angeles's lower- and middle-income renters face economic uncertainty and rising rental costs, the region's recent multifamily leasing activity has been driven by higher-income earners seeking top-tier apartments — an outlier amid U.S multifamily trends.
Although they comprise only around 15% of the market’s units, four- and five-star multifamily properties saw renter demand of 8,500 units in the past 12 months — activity that the 7,000 units recently constructed in the region. Vacancy in four- and five-star apartment buildings sits at 8.4%, which is currently the highest among quality segments in Los Angeles, but a reduction from a recent peak of around 10% in mid-2023.
Many other markets across the United States, for comparison, actually saw four- and five-star vacancy rise since the second half of 2023, mainly because of robust construction pipelines. In greater L.A., however, net deliveries during the past 12 months represent around a 0.9% expansion of existing units, below the 3.3.% increase in apartments witnessed nationally.
In contrast to improving occupancies in higher-end communities, vacancy continued upward in one-, two- and some three-star buildings. One- and two-star apartments, which comprise around 65% of units in greater L.A., witnessed demand of negative 2,100 units in the past 12 months. Three-star apartments, about 20% of the market’s units, saw demand for 860 apartments.
Lower- and middle-income residents face more significant budget constraints, with rents still near record levels. These renter cohorts have driven more limited household formation and continued outmigration from greater L.A. to more affordable metros.
Comentários