Only Two SoCal Cities See Strong Rent Growth During Peak Season

Apartment rent growth in Southern California is continuing to slow. According to a new report from Yardi’s Rent Café, only Los Angeles and San Diego had rent growth above 1% month-over-month during peak rental season. Los Angeles rents increased to $2,516 in July, an extra $112 added to the average rent since last year, and San Diego rents hit $2,216, an increase of $52.

“From June to July, rent in Southern California didn’t increase significantly. It only experienced a 2% increase in the overall average rent for the region, and compared to July last year, it increased by 2.6%. However, this is not all that surprising given the fact that smaller, less pricey cities saw the highest rent growth. And this is not only seen in Southern California, but also at the national level,” Sanziana Bona, research analyst at Rent Café, tells GlobeSt.com.

While most cities had flat or nominal rent growth, Los Angeles rents increased 1.3% and San Diego led the Southern California market with 1.9% rent growth. Despite leading the Southern California region, these are still considered nominal rent increases. “Los Angeles and San Diego will continue to experience rent growth in the future, because even though the new units delivered until now have made an impact, supply still has to catch up with demand,” says Bona. “Looking at the cities’ business-friendly environments and the education-rich labor force, more companies are setting offices in these locations. This has not only had an impact on the local economy, but due to the large number of individuals drawn either to remain in or migrate to these cities, it has put pressure on the multifamily rental market as the supply of multifamily units still lags in large cities, not being able to keep up with the high demand.”

While rent growth wasn’t strong, no markets saw a decline in rents during the peak season, and while Los Angeles and San Diego led in terms of percentage growth, Culver City and Burbank had the highest dollar amount increases. Carlsbad and Newport Beach, had the slowest rental growth during the season. Bona expects rent growth to shift to smaller cities, particularly those in the Inland Empire. “In large cities, rent will continue to increase but at a more moderate rate due to the new multifamily units already on the market,” she says. “On the other hand, the smaller cities surrounding these locations, which have not built enough, are expected to register higher rent growth due to an influx of renters looking for cheaper apartments.”