OC Among Top 50 Rent -vs.-Own Counties

ORANGE COUNTY-Orange County is within the top 50 counties nationwide in terms of the percentage of households that rent vs. own residences, according to a multifamily snapshot from Jones Lang LaSalle. This fact, in combination with the increasing cost of homeownership, has kept renter demand strong throughout the metro area in recent months, the firm reports.

Even with the introduction of new apartment deliveries, unit absorption has kept its pace, average 2,400 units per quarter, says JLL. Market vacancy is 3.6%, its lowest level since 2000, and annual rent growth across the area averages 4.3%. There are approximately 3,419 units under construction, which would increase inventory by 1.6%. Over the last three years, absorption averaged 4,300 units per year, on a net basis.

JLL also reports that demand for multifamily assets in Orange County is strong, since nearly $900 million in transactions have traded hands over the last 12 months. Year-to-date sales volume as of August 2013 totaled $455 million, and apartment operators are dominating acquisition activity with $233 million in purchases, followed by REITs with $136 million.

Cap rates have continued to compress, with the rolling 12-month metro average currently 4.67%, a 62 bps decrease year-over-year, according to JLL. In terms of area demand, based on total dollar volume the city of Seal Beach leads in year-to-date sales with $136 million, followed by Santa Ana at $63 million, Costa Mesa with $58 million and Anaheim with $45 million.

Orange County's fundamentals look good for multifamily, with the affluent coastal appeal aiding job growth, JLL also reports. The housing- and tourism-based economy is seeing job gains on the back of recovery within those industries. Over the last 12 months, payrolls have grown 2.3%, the second highest in California, and all major employment sectors have seen expansion.

The most sizable employment gains occurred in construction, financial activities and leisure & hospitality—three areas that were hit hardest following the financial crisis. Although there is still significant ground to be covered for full recovery, half of the jobs that were lost during the recession have been restored.

In addition, household formations have resumed, with the pace much higher in core and coastal cities, led by Irvine. And annual population growth has increased 10 bps annually since 2009 and is expected to accelerate into 2017, according to JLL.

Joe Leon, managing director, capital markets, multifamily, for JLL, tells GlobeSt.com, “The Orange County multifamily market is very robust. Strong fundamentals are creating upward pressure on rental rates, making OC one of the most sought-after multifamily markets by investors. A growing Millennial population and expensive for-sale housing market also fueling the success of the county's apartment market. Foreign investors are showing increased interest in the area's apartment sector.”

As GlobeSt.com reported in November, Crown Acquisitions Inc. has expanded its property portfolio to include commercial office buildings and luxury single-family homes in addition to its core multifamily properties. The move was made in order to complement the firm's multifamily investment platform, for which it became known.