Average Asking Rents Have Moved Sideways in the Second Quarter
By Ryan Patap CoStar Analytics
June 20, 2023 | 11:42 AM
Average asking rents for apartments in Los Angeles have crept back up to the peak levels seen over the summer, though prices have begun to level out over the last several months.
Asking rents sit at $2.85 per square foot per month as of mid-June, up slightly from $2.83 per square foot per month at the end of last year. That puts current rents back at August 2022 levels, the previous peak for the market, though they have been flat since the start of the second quarter.
It’s evident that modest renter demand, driven by economic uncertainty and inflation concerns, has affected landlords’ ability to push rents substantially during the past year in the Los Angeles area. The vacancy rate is up to 4.6% after hitting a two-decade low of 3.8% in the first quarter of 2022. Leasing activity has also been well below historical trends. Net absorption, or the difference in move-ins versus move-outs, during the past 12 months was 3,200 units. That is well below the average annual absorption of 8,200 units during the past decade.
Additionally, positive but weak renter demand was insufficient to offset the completion of 11,000 net new units during this time.
Areas of the market with smaller construction pipelines or that provide more affordable units, including many pockets of the San Fernando and San Gabriel valleys, have generally fared better year to date and are experiencing moderate upward movement. In contrast, areas with some of the most expensive units, including many areas of Westside Los Angeles and Santa Monica, have faced downward rent pressures in 2023.
As a result, the percentage of properties offering concessions in Los Angeles County is up from a recent low of 11.2% in August 2022 to 28% as of mid-June, demonstrating landlords and property managers are increasingly concerned about attracting and retaining renters.
The baseline outlook for the Los Angeles apartment market calls for rents to continue to hold flat through the remainder of the year. By the end of this year, rents are expected to only be up by 0.5% from the beginning of 2023.