SoCal Apartment Market to Stay Tight in 2001

LOS ANGELES-Apartment builders, lenders and brokers say Southern California’s multifamily market should get even stronger next year, despite a big upturn in construction and a widely anticipated economic slowdown.

Though multifamily construction is up about 20% in the Southland so far this year, the addition of an estimated 25,000 units that have been built still badly lags demand, according to the Burbank-based Construction Industry Research Board. And while another healthy gain is forecast for 2001, forecasters at Grubb & Ellis say demand will still overwhelm new supply by a 12-to-1 ratio.

“From a demand side, there is no reason for the market to slow down,” says Barry Kamel, president of the multifamily development division of Sares-Regis Group, the Irvine-based real estate giant. “From a supply side, there are constraints on obtaining land. The market will remain status quo, which means it will still be a sellers’ and landlords’ market.”

Ben Bartolotto, director of the non-profit Construction Industry Research Board, says development this year will be limited by at least three familiar builder bugaboos: A shortage of buildable lots, skyrocketing land values and homeowner groups who don’t like rental projects. “We’ll never create equilibrium in development because there are so many NIMBYs out there that don’t want development in their communities,” laments Bruce Furniss, SVP of Grubb & Ellis’s Anaheim office.

The region’s low multifamily vacancy rate–roughly 2% in San Diego and Orange County and about 5% in Los Angeles and the Inland Empire–points to another sharp rise in rental rates in 2001. “We’ll still see a robust expansion in rent,” says Harvey E. Green, president/CEO of Marcus & Millichap Real Estate Investment Brokerage in Encino. Several Southland markets have seen rent hikes of 10% or more this year, Green adds, and many will see similar gains over the next 12 months.

Green and other experts provide a more detailed glimpse of the 2001 market in the January issue of Real Estate Southern California, a sister publication of GlobeSt.com. The issue is expected to be mailed in about two weeks.