Q2 2023 Multifamily Market Outlook – Los Angeles
The lifting of state and local eviction protections in January 2023 has led to a rise in vacancy and rent in LA County’s multifamily market. Tenants who have not been paying rent are now facing eviction, and landlords can collect unpaid rent from tenants, some of whom have not paid for several years. In Q2 2023, the vacancy rate increased by 100 basis points compared to the previous year, reaching 4.7%. The primary driving force behind this trend is the completion of construction projects, which has seen a staggering annual increase of 65.2% year to date. However, there has been an 8.3% annual decrease in the number of units under construction.
TRENDS TO WATCH
The Federal Reserve’s interest rate increase will have a significant impact on the multifamily market, resulting in reduced demand for investment and limited financing options for developers and investors. As credit conditions tighten, the multifamily market is adjusting to higher borrowing costs, significant inflation, a weaker growth outlook, and increased financial risks. In Q2 every submarket in L.A. County has witnessed an increase in vacant units and a decline in year-to-date sales volume.