By Adriana Pop
Demand for apartments continues to be strong in Orange County, where high construction costs and surging land values maintain the housing market as one of the most expensive in the country. Following this year’s surge in construction, occupancy has remained tight, indicating rapid absorption of new deliveries, while rent growth dropped to 2.6 percent as of October.
The multifamily market received a boost from high-paying jobs in sectors that attract the region’s educated workforce, such as technology, biotech, finance, health care, aerospace and higher education. Despite a slowdown, the labor market continues to expand, fed by a boom in construction. A notable mixed-use project, LT Global Investments’ $450 million LT Platinum Center in the fast-growing Platinum Triangle, is slated to encompass office, retail, hotel space, apartments, condominiums and a movie theater. Large office developments include the 1.1 million-square-foot Five Point Gateway and the 38-acre Flight at Tustin Legacy.
Escalating market pressures point to an affordable housing shortage. For investors seeking value-add opportunities, apartments have become hot commodities, but, as rents rise following renovations, low-income residents are being displaced by a higher-earning cohort. Moreover, while legislation keeps property taxes low for existing owners, it does not keep rates from reaching current market levels once a property changes hands, further contributing to rent hikes.