L.A. Class-B and C Apartments Could See Rent Increases

It is still too early to tell how severe the oncoming recession will be or how long it will last. However, there is a plausible scenario that class-B and class-C housing in Los Angeles could see substantially higher demand as a result of the downturn, leading to rent gains in that market segment. Apartment List released a survey of March rents, showing flat rents consistent with long-term trends in Los Angles. The data was still to early to show the impacts of the virus, but the forecast might not be total doom.

“It seems highly possible that when moving activity returns to more normal levels, an uptick in downgrade moves could result in even tighter competition for rental units at the middle and lower ends of the market, while luxury vacancies get harder to fill. In this scenario, it wouldn’t be unreasonable to see rents fall for class-A properties, while class-B and C actually see accelerated rent growth.,” Christopher Salviati, housing economist at Apartment List, tells GlobeSt.com.

The demand shift to this market segment is largely due to Los Angeles’ exposure to job loss resulting from closures and social distancing restrictions. “A recession of some magnitude seems largely inevitable at this point, but it’s exact severity and duration, as well as the specific local impact to the L.A. area, are all a bit tougher to speculate on,” says Salviati. “That said, in a report we released last week, we found that the L.A. metro has the eighth highest share of workers facing immediate economic risk from what we’ve deemed the quarantine economy.”