Monday, May 9, 2011

Los Angeles Apartment Vacancy is 4.9% Entering 2011, down .5% in 9 Months -- First Vacancy Decline Since 2002 -- Westside and San Fernando Markets Tigthen Considerably, Reversing Trend

Things are looking up for Los Angeles apartment owners when it comes to vacancies. The average apartment vacancy in the city of Los Angeles declined from 5.4% in March 2010 to 4.9% in December 2010 (the most recent date for which data is available), a .5% drop.

Also note that the increase in vacancy rate was nearly unabated from 2002 - 2009.  The tide has turned, and the vacancy trend has reversed.

Considering the weak overall economic recovery and the persistently high jobless rate in Los Angeles City and County, this reduction in vacancy is a bellwether for improving multifamily fundamentals in Los Angeles.

The vacancy breakdown of the four geographic areas in December 2010:
  • Central Los Angeles: 5.2% (down .3% since March 2010) -- 416,000 units
  • San Fernando Valley: 4.4% (down .8% since March 2010) -- 224,000 units
  • West Los Angeles: 6.1% (down 1.0% since March 2010) -- 116,000 units
  • Harbor Area: 4.0% (up .1% since March 2010) -- 31,000 units
The largest district, Central Los Angeles, includes neighborhoods like Wilshire (95,000 units, 4.7% vacancy, down .7% since March 2010), Hollywood (75,000 units, 5.0%, down 1.1% since March 2010), South Central (49,000 unit, 7.2% vacancy, unchanged since March 2010) and Silver Lake / Echo Park (18,000 units, a low 4.4% vacancy, down .3% since March 2010.) The lowest vacancy was recorded in Boyle Heights (3.6, down .2% since March 2010).

The second largest district, the San Fernando Valley Area, includes North Hollywood (42,000 units, 4.8% vacancy, down .3% since March 2010), Van Nuys (37,000 units, 4.3% vacancy, down .8% since March 2010) and Sherman Oaks-Studio City (23,000 units, 4.5% vacancy, down .8% since March 2010). The lowest vacancy was in Pacoima - Sun Valley (5,000 units, 3.3%, down .6% since March 2010).

West Los Angeles, the third largest area, includes Palms-Mar Vista-Marina del Rey (35,000 units, 3.9% vacancy, down .9% since March 2010), West LA - Century City - Rancho Park (30,000 units, 4.3% vacancy, down 1.0% since March 2010), Westwood (15,000 units, 5.2% vacancy, down 1.4% since March 2010), Venice (13,000 units, 9.1% vacancy, unchanged since March 2010) and Westchester-Playa del Rey (12,000 units, 6.9% vacancy, down .8% since March 2010).

The Harbor Area, includes San Pedro (14,000 units, 4.3% vacancy, down .1% since March 2010), Wilmington-Harbor City (10,000 units, 3.2% vacancy, up .2% since March 2010) and Torrance-Gardena (7,000 units, 4.9% vacancy, up .1% since March 2010).

Our conclusion? The rental market across vast swathes of Los Angeles is becoming tighter and flipping from one favoring tenants to favoring landlords.

Consider that 65,000 units of Westside rental stock (Palms-Mar Vista-Marina del Rey, West LA - Century City - Rancho Park) is averaging 4.1% vacancy down a full percentage point from nine months earlier.  60,000 units of San Fernando Valley rental stock (Van Nuys, Sherman Oaks-Studio City) is averaging 4.4% vacancy down .8% from nine months earlier.

Vacancies in the 4.1 - 4.3% range is a tight market, and the drop in vacancies has been precipitous during the nine month period.

Also, consider that multifamily construction in Los Angeles County has virtually ground to a halt for the past 2.5+ years (see chart of Los Angeles County multifamily building permits above). There are few new buildings coming online and virtually no vacant land to build on, meaning the supply of units in the future will be constrained.

See our Blog Post from May 14, 2010 on Los Angeles apartment vacancy rates.

Data comes the Department of Water and Power (LADWP) and its records on individually metered apartments. We consider this the best reflection of the market, although it does not cover records from the cities of Santa Monica, Beverly Hills, West Hollywood, etc.