DTLA Apartment Occupancy Falters As New Supply Comes to Market

The apartment occupancy rate in Downtown Los Angeles is faltering as new supply comes to market. According to the latest report from the Downtown Central Business Improvement District, apartment occupancy fell nearly 7% year-over-year to 87%. The news isn’t particularly shocking, considering 5,600 units have delivered in the last year. Most experts expected—at least—a temporary rise in vacancy.

“Given DTLA has experienced record deliveries over the past five quarters, including 2,300 residences in quarter one alone, it shouldn’t be a surprise that the occupancy rate is down a bit year-over-year,” Nick Griffin, executive director of the DCBID, tells GlobeSt.com.

While year-over-year occupancy rates fell, demand bounced back in the second quarter of the year, increasing 3.4% quarter-over-quarter. “More pertinent to us is that the rate is rising, up 3.4% over the first quarter, and doing so without a drop in rents,” says Griffin. “I would also say the velocity of current lease-ups – again with many properties ahead of their projections—proves the demand has legs and should inspire continued confidence in the strength of the market and appeal of DTLA. There are currently over 5,000 residential units under construction and over 30,000 proposed.”

The resurgence of leasing activity in the second quarter along with the stable rents is a sign that demand is keeping pace with the new construction activity, according to Griffin. In fact, leasing activity is exceeding developer timetables and expectations. “On the most basic level it shows that demand is as strong as ever and able to sustain the incredible growth that we’ve seen the past few years,” he says. “The velocity of absorption, often ahead of the developers’ projections, also means that Angeleno’s have really taken to both the dynamic urban lifestyle that DTLA offers and the high-rise living that these projects are bringing to market.”

Downtown Los Angeles is also capturing the needs of today’s renters, in terms of market amenities and the quality of the buildings. “I think it also speaks to the quality of these new communities and the lifestyle they provide,” says Griffin. “The Downtown Center BID regularly hosts a housing tour showcasing the top new properties, and in addition to running at capacity each month, the attendees are always really impressed to witness first-hand the buildings, units and amenities that are available throughout Downtown.”

The rising demand will continue to fuel development activity. Not only does Griffin believe there is no issue of oversupply, but he believes that the market can potentially accommodate more units. “DTLA is becoming a mid-sized city in its own right, and that’s how its capacity for growth should be judged,” he says. “City Planning’s 2040 projections for DTLA are for at least 200,000 residents. That’s more than double today’s population and works out to more than 5,000 new residents per year for the next 20 years.”