Apartment Market to Soften

Apartment markets will “soften moderately” in Los Angeles and Orange counties during 2002, continuing trends that began in 2001, according to a new forecast.

In Los Angeles County, rent growth will slow to 3%, compared with 5% in 2001, said the report by Marcus & Millichap. The county’s vacancy rate is expected to increase to 4.3% by the end of the year, up from 4%.

“Many landlords, especially in Central L.A. and the South Bay, are finding themselves in the peculiar position of having to evict tenants who are no longer able to pay their rent,” the forecast said. Many travel and hospitality industry workers who lost their jobs after Sept. 11 no longer can afford their apartments.

In Orange County, vacancies are projected to peak at 4.5% by mid-year, up from 4% in 2001, and begin recovering in the second half. Rents are expected to grow by 2%.

Both Marcus & Millichap and Los Angeles-based PCS Development see good long-term prospects for the Southern California apartment market despite the current softening.

“The inherent imbalance between supply and demand will remain,” said the PCS outlook, which noted that the company is proceeding with construction of 148 units in Thousand Oaks, 221 units in Long Beach and 35 units in Beverly Hills.

Bob Howard