Fundamentals Flourish in LA

Increased investor interest in the metro’s multifamily assets is driving property values to new highs, while keeping acquisition yields at nationwide lows.
Los Angeles rent evolution, click to enlarge
Los Angeles rent evolution, click to enlarge

Amid a supply surge that began in 2016 and continued through 2017, rent growth has been decelerating in Los Angeles, in line with the national trend. Demand continues to be strong across the metro, sustained by robust hiring and population gains.

Job growth in 2017 was highest in education and health services, information, and professional and business services. The tech industry, which has been one of the main drivers of the metro’s economic growth in recent years, has contributed to job creation in other sectors, most notably office-using industries. Employment in these segments generated a boom in office developments, with completions reaching a post-recession high of 2.3 million square feet in 2017. Multifamily construction is also up, pushing job gains further while nudging occupancy down to 96.7 percent as of January 2018.

Increased investor interest in area communities is driving property values to new highs, while keeping acquisition yields at nationwide lows. This year, more than 12,000 units are scheduled to come online in and around the city core. And since most of these units cater to Lifestyle renters while single-family homes remain out of reach for many residents, demand for workforce apartments should stay high, contributing to an overall rent hike of 4.7 percent in 2018.

Read the full Yardi Matrix report.