ORANGE COUNTY, CA—Recent market reports for Orange County's apartment sector indicate accelerated development, with construction remaining robust into next year. Will the new deliveries present challenges for owners and operators of existing inventory?

Not likely, say industry experts with whom spoke. “What can operators of existing stock do to compete? Put out a for-rent sign,” Rick Sharga, EVP of

Editorial|&utm_term=|Website-Editorial-NAT(Website)|">, tells us. “They'll probably have five potential renters for every unit. It's a landlord's market right now. Could we see some metropolitan markets overbuilt? Possibly, but they don't need to compete too heavily in most markets for tenants.”

Sharga says looking at the situation from a national perspective, it's tough to find a place to rent these days. Landlords looking at the situation for the long run will want to consider energy efficiency and amenities for their tenants. “We are also seeing a lot of 55-plus developments being built—although these are generally in the for-sale and not for-rent category—but they come with custom amenities and offer a lot of activities. So, we might see more specialization on the rental side as we go forward.”

Marcus & Millichap recently put out a report on the Orange County apartment market that states builders will finish 5,800 rentals in Orange County this year, lifting inventory 2.5%. In 2013, only 1,700 units were completed. “The fact that there is new construction—not the same level as last year, but still moving quite well—is interesting,” Bob Osbrink, Orange County regional manager for Marcus & Millichap, tells “We're still seeing residential activity with land sales being reactive on residential buildings in Southern California. It's of interest because as some of those get built, there's still an undersupply of housing overall, which bodes well for multifamily once again.”

Osbrink adds that there is an obvious movement to rent because getting a single-family home loan is still difficult for most people. “The rental market is strong, for the most part. We seeing some commitments made to apartments by very sophisticated players throughout the county. Vacancies will continue to drop, and vacancy in apartments is pretty low right now. The new space should absorb fairly well, which is good for existing inventory.”

The fact that the deliveries will be staggered is also a positive for the market because it means it is less likely to be oversupplied. “They won't hit the existing multifamily market as hard as if they had hit all at once,” says Osbrink. “It's scattered all around the county—South County, Newport/Costa Mesa, Anaheim. In fact, Anaheim has been active in investment sales of older apartment units in the $1-million to $10-million range, and new units are being built around Angel Stadium in the Platinum Triangle are getting quite a bit of interest.”

While operators of existing inventory do need to keep an eye on the new deliveries, “I think it's in response to a supply/demand issue,” says Osbrink. “It's a response to high demand for housing from a generation uninterested in owning as opposed to having units convenient to amenities. High-density areas with more of an urban feel will lease up quite well, and these will pop up in a few different places in the county.”

Also, there has been a reuse shift of proprieties, with some industrial sites that were mixed-use retail or office now being rezoned over to multifamily, Osbrink points out. “That's also reflective of where the demand sits in the county.”

How will the new deliveries impact trading? “We're seeing high velocity right now in properties being traded,” says Osbrink. “Certain people who have held properties for a long time want to get into a different property type or newer properties. There has been a lot of activity—we've had a very active year all the way around, on institutional as well as private-client properties, and not only in Orange County but as a company. I look for trading to be steady. I don't look for it necessarily to rise, but I don't think we're looking at a 2015 that's going to slow down a great deal.”

Meanwhile, as reported earlier this week, Sharga doesn't see the apartment market's strength diminishing any time soon. “We will see this trend continue for the next couple of years. I believe homeownership will decline a bit, and even the supply of apartment units that's coming online is not strong enough to keep up with the demand.”


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Carrie Rossenfeld

Carrie Rossenfeld is a reporter for the San Diego and Orange County markets on and a contributor to Real Estate Forum. She was a trade-magazine and newsletter editor in New York City before moving to Southern California to become a freelance writer and editor for magazines, books and websites. Rossenfeld has written extensively on topics including commercial real estate, running a medical practice, intellectual-property licensing and giftware. She has edited books about profiting from real estate and has ghostwritten a book about starting a home-based business.