Demand at Big Apartment Complexes Dips
Landlords of Southern California’s larger apartment complexes struggled to raise rents and fill vacancies during the first quarter as a weak economy undermined demand for rental housing, according to a real estate report released today.
However, rents continued to climb steadily in San Diego County and the Inland Empire -- areas where the economy has continued to generate jobs -- while Southern California remained one of the nation’s strongest apartment markets.
The average monthly rent in Los Angeles, Orange, Riverside, San Bernardino and San Diego counties at the end of the January-March quarter was $1,177, virtually unchanged from the previous quarter and up 4.8% from the year-ago period, according to RealFacts, a Novato, Calif.-based apartment industry research firm.
The first-quarter average occupancy rate dipped to 94.7% from 95.2% in the fourth quarter of 2002.
“When you consider the general economy and general state of job growth, Southern California performed better than a lot of other areas in the United States,” said RealFacts analyst Gerald Cox.
The Inland Empire and San Diego County reported the largest and second-largest quarterly rent gains in the West.
RealFacts surveys only large apartment complexes -- usually with 100 units or more -- that tend to charge higher rents than smaller properties. The firm’s Southern California surveys cover 1,787 rental properties with more than 410,000 units.
The apartment market in Los Angeles County remained weak during the quarter, with the vacancy rate virtually flat at 94.9%. The average rent during the period rose only $7 to $1,304.
“Following on the heels of a similarly weak performance in the last quarter of 2002, this may indicate that some of the steam has gone out of the L.A. rental market,” RealFacts President Caroline S. Latham said.
First-quarter rent growth in Orange County was the weakest in a year, with the average rent climbing only $3 to $1,234 during the period. The average occupancy, meanwhile, dropped one percentage point from the previous quarter to 94.8%.
Mark Verge, owner of Westside Rental Connection, an apartment-listing service, said demand is strong for apartments renting below $1,000, but renters are balking at higher-priced units. As a result, landlords have been cutting rents in addition to offering incentives such as free rent for the first month and move-in bonuses to boost occupancy. A Santa Monica landlord recently cut the $1,600 rent on a two-bedroom unit more than $200 after failing to get a nibble, according to Verge.
“The high-priced stuff is not moving,” he said.
Landlords of high-priced units also are feeling the effects of low mortgage rates, which are pulling many renters into the for-sale housing market, real estate observers said.
“Renters are looking at buying a home ... given the low interest rates” that make monthly mortgage payments “very reasonable,” said Esmail Adibi, director of the Center for Economic Research at Chapman University in Orange.
Not all landlords are hurting, however. In the Inland Empire, the average rent rose 1.2% during the quarter to $903, according to RealFacts. On a year-over-year basis, the average rent was up 7.6%. The average occupancy fell slightly to 94.0%.
In San Diego County, the average rent rose 1.1% from the previous quarter to $1,153. The occupancy rate dipped to 94.3% as new apartment complexes boosted supply, according to RealFacts.
*
(BEGIN TEXT OF INFOBOX)
Rent stability
Apartment rents remained relatively flat across most of Southern California during the first quarter of 2003.
Average monthly rent*
*--* 2002 2002 2002 2002 2003 Region Q1 Q2 Q3 Q4 Q1 Southern California $1,123 $1,128 $1,163 $1,169 $1,177 Los Angeles County 1,233 1,253 1,293 1,297 1,304 Orange County 1,203 1,203 1,224 1,231 1,234 Inland Empire 839 862 876 892 903 San Diego County 1,091 1,127 1,136 1,140 1,153
*--*
* Rents reflect survey of large apartment properties of primarily 100 units and more.
Source: RealFacts
