Q1 2024 Multifamily Market Outlook – Los Angeles
Market Overview
The multifamily sector maintained a steady vacancy rate of 4.8%, holding firm from the end of the previous year. The increase in newly completed units, particularly in the high-end market segment, drove the average asking rent per unit higher this quarter. Following a slight decline in Q4 2023, the average rent rose by more than half a percentage point quarter over quarter and by four-tenths of a percent year over year, with 2,425 units added to the market. This pushed the average asking rent to a record high of $2,185 per unit per month. Despite historic highs in rent prices, multifamily investment has faced significant challenges. High interest rates, concerns about a slowing economy, rising construction costs, and reduced rent growth have all contributed to this difficult landscape. Adding to these pressures, the City of L.A.’s ‘ULA Tax’ has compounded the negative effects.
Trends to Watch
The Federal Reserve’s objective to maintain interest rates elevated to curb inflation has impacted sales. This impact is evident in reduced investment demand and heightened credit costs for developers and investors. There was a substantial double-digit decrease of 12.7% year-over-year in units under construction, coupled with a notable 29.8% decline in completed units, indicating a slowdown in multifamily housing construction.
