Middle Market Digest: This Week in Southwest

The first quarter of 2018 built on the momentum of 4Q17. Early first quarter reports show continued healthy performance. In Los Angeles, multifamily absorption continues to be strong, and the leasing activity continues to fuel construction activity. In Riverside, industrial absorption was also strong, despite a severe lack of inventory. There were 10.6 million square feet of gross activity in the quarter, with the majority coming from investment sales and lease activity. In addition to strong performances in the Southwest market, there was also ample deal volume and new development news this week, with a strong flow of deals in Southern California. Here’s a look at this week’s trends, announcements and deals that you may have missed in Southern California, Utah, Arizona and Nevada.

BY THE NUMBERS

LOS ANGELES—After absorbing 10,500 units, Los Angeles has preserved tight vacancy and pent-up demand throughout most of the market. Recent leasing has spurred a rise in construction activity, with a cycle-high number of new rentals slated for finalization this year. While this influx of apartments could be cause for concern, increasing single-family home values, a strong rate of household formations and diverse job growth suggest the county should experience a second consecutive year of robust absorption. However, demand for luxury rentals is being tested. In 2018, more than 17,000 units will be completed in the county, a record level of multifamily development and the highest annual volume among. West Coast metros. More than 40% of this year’s new supply is in Greater Downtown Los Angeles, including nearly 4,000 rentals within the city’s core. The county’s three other primary regions are also slated to witness upticks in apartment deliveries, led by the Tri-Cities/San Fernando Valley and Westside Cities where finalizations total 1,900 and 1,700 units, respectively. Renter demand should match construction activity in most locales, with the exception of downtown Los Angeles, supporting a minimal rise in overall vacancy and a second consecutive year of above average rent growth.