Occupancy Rates, Rents Plummet in Recession : * Real estate: A survey by a Laguna Hills-based firm shows that higher-than-normal vacancies have prompted apartment managers to slash rates and offer a variety of attractive incentives.


Jody Walezak inspected hundreds of kitchen cabinets and peeked into what seemed an endless number of bathrooms before she settled on her cozy one-bedroom apartment in Lake Forest.

"This was the most relaxing atmosphere I found," the 37-year-old social service worker said Friday from her apartment at the sprawling River Oaks Apartment complex, which offers such amenities as a babbling brook, a swimming pool and a spa.

It also had the best move-in deal she found after poking her nose into 50-odd apartments in Lake Forest, Mission Viejo, Laguna Niguel and Laguna Hills: $710 a month plus a $99 deposit.

She could, after all, afford to be choosy.

"If they (apartment managers) were too pushy, I left," Walezak said. "It really did bother me if someone was too aggressive."

Walezak is not alone.

Apartment analysts said that the recession has hit the Orange County apartment industry as hard as any other sector, forcing owners and management companies to launch aggressive tactics to fill their empty units.

That fact appears not to have evaded prospective renters, who have recently found that a wait-and-see attitude often results in a good deal.

A survey just released by Research Network Ltd., a Laguna Hills-based real estate research firm, shows that higher-than-normal vacancies have prompted apartment managers to slash rents and offer a variety of attractive incentives.

"The apartment industry is not in good shape," said Donald Carlsson, a Research Network spokesman. "If you are an apartment owner it's not a good time for you. It is definitely a renters' market."

For instance, average rents for apartments in Orange County have dropped to an eight-year low of $778, while the average occupancy rate--now the lowest in the state--has fallen to 95.2%, from 96.5% last year, said Research Network's Matt Disston, who conducted the survey in March.

The $778 figure, down 2% from the previous year, most closely matches the average rent of a two-bedroom, one-bath apartment. The range of rents begin at $609 for a studio to $1,013 for a three-bedroom unit.

The survey looked at more than 80,000 apartment units in the county. The survey did not supply comparable figures for Los Angeles County.

If the average rent had kept up with inflation during the past eight years, the average monthly rent would have been $964, Disston said.

But because the slumping economy has hit Orange County hard, resulting in the loss of more than 65,000 jobs, the apartment rental market has gone into a tailspin.

"Apartments and jobs are closely related," Disston said.

Consequently, prospective renters can take their time, shop for the dream apartment and make the right decision before signing a lease, he said.

About 70% of apartment managers in Orange County are offering some kind of move-in incentive and the smaller management companies have been forced to make deals that cut deep into their profit margins, Disston said. That figure is up from 40% in 1990 of managers who offered incentives.

To stay competitive, managers of smaller apartment complexes are forced to undercut the larger companies, resulting in greater financial risk, Disston said.

He said many complexes have 15% of units under some incentive agreement. Those kinds of discounts in a 100-unit complex with 95 apartments rented, for instance, generate revenue that on paper make the complex appear to be only 85% occupied.

"Rental inducements make the (95%) occupancy rate much more critical," Disston said.

Some complexes suffer even higher vacancies.

Jan Lee, a spokeswoman for West Bay Properties Inc., which manages 450 apartment units in Costa Mesa, said her company is struggling with a 91.1% occupancy rate. Vacancies in the past year have more than doubled.

"It's tough times," Lee said, "just like everyplace else."

Like other management companies, West Bay Properties has been forced to lower rents and offer move-in specials, such as a $200 discount on the first month's rent.

"It's pretty depressing, actually," she said.

So where are all the renters?

Michael L. Meyer, an analyst with the real estate consulting firm of Kenneth Levanthol & Co. in Newport Beach said that the recession has not only forced many renters out of the county in search of new jobs, but many others have moved in with roommates or family to save money.

He also said the "mini-flurry" of home ownership, especially in the condominium market, has taken renters.

Bret Donaldson, a spokesman for the California Apartment Assn. in Sacramento, agreed. He said that the occupancy rate for Orange County is 1.3% lower than the state average. The occupancy rate in Los Angeles County equals the state rate.

Management companies are "watching each other closely," said Research Network's Disston, looking for changes in the industry. "They are very hesitant to offer much more than the other guy is," he said.

Disston said he expects a general turnaround in the apartment industry within two years.

With construction and planning of new apartment complexes at a virtual standstill, and a number of complexes already converted to condominiums, the empty units are likely to be slowly filled as the recession wanes and the economy gets back on track.

Investors in apartment complexes should be ready for the long haul. By the end of the '90s, industry analysts said, returns in investments will begin pouring in.

"It's been an up-and-down market; right now we are on the downside," analyst Meyer said. "I think there will be an upswing about then."

Apartment Living

The effects of the recession, job losses and continued apartment construction have contributed to a drop in apartment occupancy and rental rates.

City View

Communities with the highest and the lowest occupancy rates.


City Percentage Brea 99.2% Placentia 97.9 Seal Beach 97.4 Cypress 97.1 Fountain Valley 96.8 San Clemente 96.6 Anaheim 96.4 Mission Viejo 96.2 Buena Park 96.1 Irvine 95.7 Lake Forest 95.7


City Percentage La Palma 92% Westminster 92.2 Laguna Beach 92.8 Los Alamitos 93.3 Tustin 93.8 La Habra 94.2 Dana Point 94.4 Costa Mesa 94.5 Laguna Hills 94.7 Santa Ana 94.9 Stanton 94.9

For Rent

Communities with the highest and lowest average monthly rents.


City Amount Seal Beach $1,096 Newport Beach 949 Irvine 942 Laguna Beach 936 Dana Point 931 Yorba Linda 882 San Juan Capistrano 879 Costa Mesa 835 Laguna Niguel 827 Placentia 820 Laguna Hills 819


City Amount La Habra $633 Fullerton 689 Buena Park 690 Los Alamitos 690 Anaheim 693 Stanton 701 Tustin 705 Garden Grove 720 Orange 736 Rancho Santa Margarita 742 Westminster 742

Average Rents by Apartment Size

South County and the coastal areas have the highest monthly rents; North County has the Most affordable rents.

NORTH COUNTY CENTRAL COUNTY SOUTH COUNTY Size 1991 1992 1991 1992 1991 1992 Studio $564 $557 $610 $582 $711 $649 1 bedroom 640 636 659 656 777 754 2 bedroom, 1 bath 742 751 741 745 902 847 2 bedroom, 2 bath 819 820 837 804 954 940 3 bedroom 921 928 922 916 1,090 1,109 4 bedroom N/A N/A 980 947 1,025 950

Source: Research Network Ltd.

A County History

As of March, 1992, occupancy rates in Orange County hit a seven-year low, and average monthly rents dropped after three years of increases.

Year Occupancy Rent 1985 99% $702 1986 97.7 698 1987 97.8 750 1988 96.9 725 1989 96.3 751 1990 96.5 773 1991 96.5 794 1992 95.2 778

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