NEWPORT BEACH, CA—Some renters who can't afford Orange County's high and rising apartment rental rates are moving farther from their work to more-affordable locations or Orange County-adjacent markets where the rent discrepancy is significant, CBRE VP John Montakab tells GlobeSt.com.

According to CBRE research, with an average home price of $785,000 and stagnant income growth, Orange County will have a surplus of people who need housing but cannot afford the costly down payment and mortgage payments of buying a home. As a result, there has been a 33% rise in rents since 2011. With an expected addition of about 74,000 people over the next five years, and single-family homeownership out of reach for many, demand for multifamily will remain strong in Orange County.

The firm also reports that rent growth is likely to stay near the long-run average of 3.1% and vacancy is expected to continue trending downward—keeping Orange County well positioned through 2018 and beyond.

Given all of these projections, we spoke with Montakab about renter options and how multifamily owners, operators and tenants are making it all work.
GlobeSt.com: As demand for multifamily in OC heats up and single-family homes become more unaffordable, how are renters dealing with rising rental rates?

Montakab: The demand for apartments has outpaced the supply. In Orange County, renters are paying a larger percentage of their income for housing compared to the national average. In some cases, we see renters moving farther from their work to more-affordable locations or Orange County-adjacent markets where the rent discrepancy is significant. A newer phenomenon/ trend we are seeing in areas that have multiple properties with vacancies—such as Laguna Niguel, Irvine Business Corridor, and Platinum Triangle—is that renters are moving every year to take advantage of the concessions being offered.

GlobeSt.com: What are multifamily owners and operators doing to justify the increases?

Montakab: Since 2012, we've seen owners implement value-add strategies to attract renters and be able to increase rents. These upgrades included enhancements to both the property interiors and exteriors. More recently, we are seeing owners adding additional services and amenities to properties such as expanding clubhouses and fitness centers and creating experience-based environments by completing significant upgrades to common areas such as pool decks and barbeque areas. Conversely, developers are building apartment complexes that rival luxury resorts, which provide services such as dog walking, laundry and concierge services.

GlobeSt.com: What are renters willing to give up in order to afford the higher rents?

Montakab: I wouldn't phrase it as renters giving anything up, rather renters replacing services they already have with those that the property offers. For example, renters cancel their gym memberships because apartment complexes offer state-of-the-art facilities that rival any national chains. Additionally, we see the concept of placemaking really guiding the design and amenities at apartment complexes. By offering lifestyle-based amenities, residents are spending more time at the complex rather than going offsite for entertainment and dining.

GlobeSt.com: What creative ways are both sides coming up with to make it all work?

Montakab: As homeownership becomes further out of reach for many in Orange County, and Millennials become the predominant renter demographic, we are seeing apartment complexes evolving into more than just a place to rest at the end the day. By providing a lifestyle-focused experience with a multitude of services and amenities, both owner and residents benefit as apartment complexes become a long-term solution for housing.

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How Apt. Renters Are Dealing with Rising Rates

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