Rise in New Rentals Won’t Meet Demand

More newly built apartments will become available this year in the San Fernando Valley than in any other portion of Los Angeles County except the booming Westside, recent real estate industry reports show.

But even with 900 new Valley units opening their doors this year, and an additional 600 new apartments due to open next year, the increase in supply pales in comparison to an estimated yearly demand for 2,400 new or vacated units, according to real estate experts and the “Apartment Research Report” issued Monday by Marcus & Millichap, a leading apartment brokerage.

The tiny increase in supply comes at a time when apartment vacancies in the Valley are at historically low levels, leading to continued concern in some quarters about a possible housing crunch.

“Apartment construction has been really, really slow,” said Maya Mouawad, manager of research services at Marcus & Millichap’s Encino office.

Noting that the vacancy rate in the Valley is about 5%, down from 10% just two years ago, Mouawad added: “In the short term, that’s great news for apartment owners. But in the long run, there is a concern about whether we’re heading for some sort of housing shortage, not just in the Valley, but all over L.A. County.”

All told, only 145 new apartment units are slated to become available in 1998 in the portion of Los Angeles that includes East L.A., Mid-Wilshire, Hollywood and West Hollywood, according to another recent report from the real estate firm.

That’s a fraction of the construction activity on the Westside, which includes areas such as Brentwood, Beverly Hills, Westwood, Venice and Culver City but not Santa Monica. The supply of new apartments on the Westside is expected to grow by 1,050 units this year.

By comparison, the Valley’s 1,500 new units for 1998 and 1999 doesn’t look half bad.

“It may seem like the Valley is in better shape,” said Mouawad. “But when you put it side by side with the potential population growth, it’s still not significant.”

Mouawad and other experts had a laundry list of reasons for the dearth of apartment construction in the Valley and elsewhere: lack of available land, governmental encouragement to build retail outlets over housing, and the cost and bureaucratic hurdles involved in securing building permits for new apartments, to name a few.

Add to that the lure of the Valley’s single-family homes, made more affordable by recession and lower interest rates, which reduces the pool of possible tenants.

“With the lowest interest rates in a generation, that has discouraged multifamily construction,” said Harry D. Hartnett, chief economist and research director for the Ernst & Young Kenneth Leventhal Real Estate Group in Century City. “A lot of people who used to rent can buy now.

“The San Fernando Valley is more single-family oriented than other areas,” added Hartnett, a Valley resident. “People are buying up the single-family homes in the Valley. That’s where the profit is for a developer.”

There’s also profit, experts said, in the high-end market, a small but growing niche occupied by expensive developments like L’Estancia in Studio City and The Premier in Sherman Oaks, which quickly filled with upscale tenants willing to pay top dollar for a passel of extra amenities.

Jim Ring, owner of Santa Monica-based Ring Financial and the developer of L’Estancia, cited a proposed development announced for the area near the Metro Red Line station in North Hollywood as evidence that more apartment development is likely to come to the southeast Valley in the years ahead.

“I think there’s a lot going on in the Valley,” he said.