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High-End Apartment Construction Dominates in Greater Los Angeles

Market Holds a Greater Percentage of Premium Projects Than Most Areas Nationally

Apartment Construction

By Ryan Patap

CoStar Analytics

August 30, 2023 | 7:55 AM

Apartment construction in greater Los Angeles has overwhelmingly comprised higher-end four- and five-star projects recently. In the past 10 years, the market witnessed 89,000 net new units added. Around 95% of those units were in higher-end four- and five-star properties. Given the area’s chronic housing shortage, particularly for affordable apartments, many wish developers would focus more on economical properties.

However, barriers to construction have directed activity in recent years towards higher-end developments, as these projects are often the only projects that can make sense financially. High development costs, anti-density policies, and demanding permitting processes all stymie construction and drive up construction costs.

Greater Los Angeles' apartment inventory has increased by around 10% in the past decade versus 24% nationally. Los Angeles County has seen some of the lowest construction activity on a percentage-of-existing-unit basis of any major apartment market nationally.

The current construction pipeline still mainly comprises four- and five-star developments. Of the 20,000 units under construction, 85% are underway in four- and five-star projects. This percentage has been relatively consistent since early 2020. The current rate is down slightly from several years ago, though. From late 2012 through 2019, over 90% of units underway were in four- and five-star complexes.

The concentration of activity is still well above most other markets nationally. Today, 68% of apartment units under construction in the U.S. are in four- and five-star projects. Given the burdens developers face in the market, greater Los Angeles will likely continue to see among the nation's highest percentage of higher-end construction.


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