CoStar Insights

Los Angeles Apartment Market: Three Observations

by Stephen Basham | Sep 26, 2016
Downtown LA


Rent growth has cooled down from an eye-popping 7.9% in 2015 to a current rate of 4.2%. The bright side for landlords: incomes are growing for the first time since 2014. In fact, the gap between income growth and rent growth continues to narrow, as you can see below. Renters should have much more capacity to handle rent increases going forward, so there’s hope that current growth is sustainable.



Earlier this month, we wrote about how, across the country, urban core multifamily may be overbuilt, citing Los Angeles as a prime example. Downtown Los Angeles has twice the number of units under construction than any other submarket, despite subpar rent-growth in 2015 of around 4%. On the other hand, secondary submarkets currently enjoy above-average rent growth.


Asset pricing has not yet reflected softening rent growth and vacancy. Cap rates in 4&5 Star and 3 Star continue to tighten even as fundamentals are loosening slightly.



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