ORANGE COUNTY, CA-While multifamily construction in Orange County took a bit of a pause during the first half of the year, research shows that it will likely resume again in the second half, according to Marcus & Millichap. The firm reports that thousands of apartment units are due to deliver during the next six months, and permits are outpacing completions so far this year.
Most of the units to be delivered are scheduled for Irvine, Newport Beach and Huntington Beach, according to the report. Newport Beach and all three Irvine submarkets reported a decline in effective rents during the first quarter, and the pause in construction brought some stability to the market during Q2. Still, a return to robust construction could chip away at rental rates for class-A assets in the near future.
Regardless of these anticipated changes, renter demand remains high in the sector, with vacancy rates below 5% throughout the county. Average year-end effective rent across the county is expected to clear $1,600 per month for the first time thanks to the submarkets where new construction is not occurring.
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As GlobeSt.com reported earlier this week, demand for both apartments and single-family homes is high among the Millennial demographic. According to Rick Fletcher, VP of sales and marketing and MBK Homes, it’s more about location, lifestyle and life experiences for this cohort than it is about personal possessions and acquisitions, Fletcher adds. “So, if builders are building in the right location, they’ll attract this buyer. If you’re building in a greenfield 30 to 40 miles away from art, culture and the beach, you may not see that buyer; they may choose to rent closer in.”