Los Angeles Vacancies are Up! Will Apartment Values Come Down?
Here at Iconic we work daily with owners of apartment buildings to help them effectively manage their properties and maximize their income and property values. The coronavirus and resulting economic impacts have played a major role in the state of the commercial real estate market today. Below is a recent article/video from CoStar Group, the leading national commercial real estate information provider with active intelligence on over 5 million properties nationwide, that outlines the current state of the Los Angeles apartment market.
Here are the main points we found to be worth knowing today:
► Local economy is in a fragile state with major job losses projected. Projections are bleak with Oxford Economics projecting over 700,000 job losses, while the Los Angeles Economic Development Council (LAEDC) projecting over 1,200,000 jobs lost as a result of the response to the pandemic.
► People are choosing to move in with roommates or back home causing negative absorption rates – vacancy is on the rise.
► Los Angeles County vacancy rates highest they have been in the past 20 years. 5.5% overall vacancy rate, expected to climb to 7% before stabilizing. Vacancy rates in newer construction and upscale communities is nearing 17%.
► Asking rents in Los Angeles are dropping for the first time since 2012 at an annualized rate of 6%.
► Transaction volume dropped by 80% in second quarter 2020 compared to the same timeframe in 2019, from $2.5 billion transacted to less than $500 million.
► CARES Act helped to stabilize the dropping market somewhat, but the benefits are set to expire shortly.
► Based on short term information, CoStar analysts projecting up to 20% drop in property values, possibly more depending on longer term economic impact and effects of a possible second event later in the year.
► Los Angeles just passed a rental relief program designed to get rent payments directly to landlords, but the benefits are limited to $2,000 per tenant.
