Los Angeles Multifamily Report – Spring 2020
With California the first state to impose shelter-in-place orders, the metro's rental market shows early signs of softening.
Los Angeles rent evolution, click to enlarge
Less than a month after California’s shelter-in-place order went into effect, Los Angeles multifamily data started showing early signs of headwinds. The average rent contracted by 10 basis points on a trailing three-month basis as of March, with the upscale Lifestyle segment recording a 0.4 percent drop.
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Los Angeles sales volume and number of properties sold, click to enlarge
Entertainment and tourism were some of the first industries hit by social distancing measures, alongside other parts of leisure and hospitality, and retail. Large employers, including Disney World in Orange County and Universal Studios Hollywood, remain closed, resulting in tens of thousands of furloughs, job cuts and pay cuts. The movie industry is reeling, with production halted on a vast number of projects, and release dates pushed beyond the second half of 2020. Meanwhile, California recorded 2.8 million initial unemployment claims in the four weeks ending on April 11, leading the nation by far. Even so, LA remains relatively well positioned in the longer run, due to its diverse employment base when compared to more leisure- or energy-heavy Sun Belt markets.
Roughly 660 units came online and $485 million in multifamily assets traded in metro LA in the first quarter of 2020, a visible slowdown from 2019. And with the current health crisis unfolding, we expect the second quarter to further soften overall investor appetite and slacken the development pipeline.
