DTLA Multifamily Back On Track After Anemic Yearend

The multifamily occupancy rate in Downtown Los Angeles has climbed above 90% after hovering between 87% and 89% in the second half of 2017. According to the first quarter report from the DCBID, DTLA occupancy increased 4.7% to 92.7%. Rental rates also rebounded in the first quarter, up 2.4% to $2.95 per square foot, while effective rents also increased 1.5%.

“The dynamism, convenience, and excitement of urban living continue to be huge draws. Nowhere else in Los Angeles do you have the walkability, cultural diversity, and connectedness of DTLA,” Carol Schatz, president and CEO of the DCBID, tells GlobeSt.com. “As the rest of the city gets more and more congested, DTLA gets increasingly walkable. What were once parking lots, are now apartments, restaurants, retailers, fitness centers, night clubs, and more. Combine this overwhelming demand with the increasing supply of quality options, and you have the makings of record-setting numbers.”

New apartment deliveries last year were largely blamed for the dip in occupancy rates. This year, the market will see an increase in new supply, and it could mean more occupancy volatility as a result. “Following last year’s record numbers, there are an additional 3,500 residential units expected to deliver over the course of 2018,” says Schatz. “The month to month occupancy rate will certainty fluctuate with all of the inventory coming to market, but if the last 12 months are any indication, demand continues to increase as well. It promises to be another record year.”

In addition to the strong apartment market, condo sales also climbed in the first quarter, up 7.9% year-over-year while condo pricing increased 12.5% to $731 per square foot. “Condo development is a long term and costly proposition that doesn’t pivot quite that quickly,” says Schatz. “Most of what is delivering today, was announced many years ago. That being said, DTLA continues to absorb inventory as it hits the market, which is a great sign for projects under construction, or are planning to break ground. Trumark Urban’s TEN50 is all but sold out, leaving Metropolis as the only new condo project expected to deliver this year. The market should remain tight. Lucky for buyers, developers have been paying attention and there are more than 2,100 condos currently under construction and nearly 6,000 more planned.”

While apartment occupancy may dip, the rebound in the first quarter shows that the new supply is getting absorbed. As a result, we can continue to expect robust development activity in Downtown Los Angeles. “The future development pipeline continues to amaze,” says Schatz. “At the close of the first quarter, there were 9,874 residential units under construction, 2,156 of them condos, and an additional 31,071 units planned, of which 5,921 are condos. Again, as we see record numbers of deliveries, we continue to see record numbers of residents, leading to the next wave of development.”