"Compared to what Orange County has seen the last few years, it's quite an upswing. Orange County has faced an undersupply of new apartments recently," says Greg Willet, editorial director for M/PF Research, a Carrollton, TX-based market research firm specializing in apartment properties. "Completions since the mid-1990s have averaged only about 1,300 units annually, inadequate to meet the needs of an area where significant job additions are helping to fuel notable new household formation."

According to the latest edition of M/PF Research's Orange County Apartment Report, there are currently 4,453 units under construction throughout the county, more than triple the 1,429 units delivered for all of 2000.

"The increase in new building to date does not appear in danger of outpacing demand capacity, as ongoing construction will grow Orange County's total apartment base by a moderate rate of roughly 2%," Willett says.

Although the number of new units is quite large, the number of properties is not. In all, the bulk of the properties are being built in Irvine by the Irvine Co. Other projects under construction include one in Mission Viejo, a two-phase project in Aliso Viejo, one in Newport Beach and one in Santa Ana.

The apartment occupancy rate for the county as a whole slipped slightly from its third quarter peak of 98% down to 97.3% in the fourth quarter of last year. Still, this rate is 0.3% higher than the rate for the same quarter in 1999. Most neighborhoods around the county are 96% occupied, but vacant units can still be found in Irvine and Newport Beach where the occupancy rate is 95%. Higher occupancy drove up asking rents for new leases last year by 11.4%, making affordability an issue for many renters.

"Affordability remains a challenge in Orange County's apartment market, especially with rates increasing so rapidly during the past year," Willett says. "The additional new construction that is emerging now could create more leasing competition among properties at the top end of the product sector, suggesting that the pace of rent growth could slow down at least moderately during the year ahead."

For Orange County as a whole, the report estimates an average rent of $1,212 per month. The most expensive apartment units in the county can be found in Newport Beach where owners are charging an average $1,657 a month. Rental rates for the remaining areas in the county range from $1,000 to $1,400 a month, with the least expensive units in Anaheim where the average rent is $902 a month.

Instant Insights /

Boom in Multifamily Construction May Slow Rent Growth at Top End of Market, Report Says

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