Reduced Demand Combined With Elevated Supply Additions Precipitate Sustained Ascent
By Ryan Patap
July 26, 2023 | 5:58 AM
Apartment market conditions in Los Angeles slackened during the first half of 2023. Since the end of 2022, the average vacancy is up 60 basis points to 4.9%. Net absorption, the difference between move-ins versus move-outs, was essentially flat, with a net of only 24 units absorbed during the first two quarters, well below the record level of activity seen in the first half of 2021, but more than what was witnessed in the first half of 2022.
New supply contributed more to the increase in vacancy during this time than demand. In the first half of 2023, nearly 6,500 net new units were added in greater Los Angeles, the most units added in a two-quarter period in decades. The three most significant projects to deliver this year include Beaudry, with 785 units in downtown Los Angeles, The Residences at West Edge, with 600 units in West Los Angeles, and Onni East Village, with 432 units in downtown Long Beach.
The rise in apartment vacancy market-wide in the first half of 2023 was not felt evenly across Los Angeles County. Burbank, the Westside and downtown Los Angeles saw the biggest vacancy increases, all by more than 180 basis points, largely driven by significant supply additions such as the aforementioned Beaudry in downtown Los Angeles and The Residences at West Edge in West L.A. Conversely, areas with minimal supply additions maintained average occupancy levels. In almost all locations within the Los Angeles metropolitan area, more-affordable units have more limited availability.
Softer demand conditions have been present since the first half of last year. The baseline forecast calls for renter activity to remain muted throughout the year's second half before picking up in 2024.