Interest Rates Update
The significant increase in interest rates, that began in 2022, has had a profound influence on all areas of the economy. Commercial Real Estate has seen a particular impact as a result of considerable increases in interest rates and how abruptly rate changes came into effect. For real estate owner-operators, and investors alike, the interest rate is not only reflective of the price of debt but furthermore is the driver of asset value. As such these changes have been doubly challenging. The higher interest rates in the last year have reduced the dependability of real estate cash flow and yields and have negatively altered investor and owner strategies. As the world adjusts to the end of the artificially low interest rates of the previous decade liquidity will continue to withdraw from the property markets. Asset valuations are dropping and it remains to be seen at what point they will plateau.
Source: Bisnow National
Author: Dees Stribling
Published: 07/26/23
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Insurance Price Update
Insurance rates have skyrocketed with weather damage, increased maintenance and construction costs and higher interest rates being some of the main driving factors behind the sharp incline in expense. This additional cost has severely impacted the performance of multifamily properties and eaten in to the profit margins. A Multifamily Risk Survey & Report, conducted by the NMHC (National Multifamily Housing Council), found that respondents indicated an average of 26% rise in insurance cost and higher premiums specifically in the target market where their Multifamily investments are situated. Older properties in Los Angeles are having trouble securing insurances and some are not being renewed by their current providers.
Source: Yahoo Finance
Author: Eric Reed
Published: 07/23/23
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LAHD Allows 7 % Rental Increase From February 2024
Information directly from the LAHD's website indicates that rent increase for RSO properties can be resumed as of February 2024. No retroactive rent increases will allowed. The annual allowable rent increase under the RSO from February 1, 2024 through June 30, 2024, will be 7% unless amended by City Council. An additional 1% for gas and 1% for electric service can be added if the landlord provides the service to the tenant. Landlords must provide an advance 30-day written notice for all rent increases of less than 10%.
Source: Los Angels Housing Department
Author: Los Angeles City
Published: 07/01/23
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Rent Increases for AB1482 Properties
According to the LAHD, effective August 1, 2023 to July 31, 2024, the maximum allowable increase for properties subject to AB1482 is 8.8%. This percentage is a combination of the national standard of 5% plus the local CPI (the percentage change in the cost of living) which, in California as of August 1 2023 will be 3.8%.
Source: The California Apartment Association/ LAHD
Author: Monica Deka
Published: 06/14/23
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Hollywood Writers Guild and SAG Strike
The combined strike of actors and writers has not occurred since 1963. The direct and indirect consequence on the US economy could exceed a fallout of $3 Billion. The impact is felt acutely in the multifamily market as many renters, owners and investors work in, or adjacent, to the film and TV industry. The true aftermath is yet to reveal itself as the situation is currently ongoing and it remains to be seen how the multifamily market will respond.
Source: Forbes
Author: Dana Feldman
Published: 07/13/23
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