Southern California Rent Control Multifamily Observations – Where We Stand in 2016
The USC Lusk Casden Real Estate 2016 Multifamily Forecast Report states the two main trends currently controlling the Southern California multifamily market are low vacancy rates and increasing rents. The market has in general been tightening in the period following the recession. In response, supply rates have ticked up. That said, the various multi-family markets in Southern California (Los Angeles County, Orange County, Inland Empire and San Diego County) have not been impacted by these trends equally. The fall of vacancy rates has been more pronounced in certain counties. Though supply has increased, it has not significantly dented the increase in multifamily rents overall.
Los Angeles Multifamily:
According to the USC Lusk Casden Real Estate report Los Angeles County incurred “nearly one-fifth of all jobs created in California last year”. This is significantly more growth than any other county in Southern California. Los Angeles County’s unemployment rate fell to 6.7%. Further employment increases are expected in the next two years. The housing market witnessed “hefty increases in rents, home sales, and prices over the past year”. The Los Angeles County multifamily sector in 2015 averaged a rent of $1,307 per month (4.8% increase from 2014), a vacancy rate of 4.2% (4.1% in 2014) and an 18% increase in construction.
Orange County Multifamily:
The USC Lusk Casden report states Orange County’s unemployment rate dropped to 4.5% in 2015. This puts Orange County’s unemployment far below both state and national averages. Further gains are expected in the next two years. The Orange County multifamily sector in 2015 averaged a rent of $1,587 per month (5.4% increase from 2014), a vacancy rate of 4.4% (4.1% in 2014), and a 16% increase in construction permits. Orange County consistently shows rising rents and low vacancy rates.
Inland Empire Multifamily:
According to the USC Lusk Casden report Inland Empire is experiencing its lowest unemployment rate in eight years. Further job and population growth is expected over the next two years. Inland Empire’s multifamily sector observed rising rents and generally lower vacancy rates. In 2015 Inland Empire’s multifamily sector averaged a rent of $1,155 per month (5.2% increase from 2014), a vacancy rate of 7.5% (7.6% in 2014) and though construction “has seen a modest rebound since the recession from 2011 through 2014” it declined by 7.8%.
San Diego Multifamily:
The report confirms San Diego County is one of Southern California’s better performing economies. It posted a 5.2% unemployment rate in 2015 – the lowest since 2007. San Diego County wage and salary jobs increased by 3.0%. Like its Southern California counterparts, the San Diego County multifamily sector is marked by rising rents and low vacancy rates. In 2015 the San Diego multifamily sector averaged a rent of $1,422 per month (5.9% increase from 2014), a vacancy rate of 4.9% (4.6% in 2014) and a 15% increase in construction.
The Souther California multifamily sector is one of the strongest in the nation. It has rebounded strongly in the wake of the recession and is poised for more growth in the future. Multifamily real estate investors can look forward to rising rents, low vacancy rates and increased construction across the board. Of the four submarkets, Inland Empire lags behind the others but its forecasted future growth provides a window of opportunity for investors seeking high returns. That said, all multifamily submarkets offer a wealth of solid investments buoyed by positive employment and economic trends.