a nice article regarding rentals in downtown from downtown news:
Rental Rollercoaster
Report Finds Los Angeles Apartment Rates Dropping, Though
Downtown Landlords See a Different Market
by Richard Guzmán
Published: Friday, April 16, 2010 4:39 PM PDT
DOWNTOWN LOS ANGELES - A study recently released by the USC Lusk Center for Real Estate had harsh tones for landlords, with a prediction that rents for Los Angeles County apartments would decline by an average of 3.5% this year.
A group of Downtown Los Angeles building owners don’t think they will take a hit.
“I don’t agree with this projection,” said developer Barry Shy, who owns six properties with more than 1,100 apartments in the Historic Core. “In my experience, new construction stopped a while back and we’re in a city where new people keep coming and the demand will still be there, but the supply is stopping.”
Shy’s stance was similar to that of several other Downtown landlords, who said that despite a 9.9% decline in Downtown rental prices last year, this year they are likely to hold steady and could even increase.
The Casden Real Estate Economics Forecast, released by the Lusk Center this month, said the high number of foreclosures and overbuilding during the housing bubble has resulted in a glut of rentals in Southern California. It also said a large “shadow supply” of single family homes and condos that have gone on the rental market will continue to put pressure on rents.
The study focused on Los Angeles County, Orange County, the Inland Empire and San Diego County. The largest projected decline was for L.A. County, and San Diego County was the only locale projected to see an increase, though with a meager 0.7% rate of growth.
Tracey Seslen, a professor at the USC Lusk Center for Real Estate who co-authored the study, said no forecasts were prepared for submarkets such as Downtown. But she said the decline is expected to be more moderate than last year’s nearly 10% drop.
“All markets are going to be performing better this year than last year, although for some that still means a decline,” she said.
Occupancy Bounce
The report does provide some interesting details about the Downtown rental market.
According to the study, Downtown showed “an incredible” recovery in 2009, with the occupancy level rising from 85.5% to 95.5%. Downtown had 8,350 net move-ins in 2009, with average rents ending at $1,654 per month, a 9.9% decrease from the previous year’s $1,836. The average rent in the Los Angeles metropolitan area in 2009 was $1,488, down 5.8% from 2008.
There were 1,307 units completed in Downtown in 2009, approximately one quarter of the supply in the county, according to the report. It also stated that 1,107 new units are expected in 2010.
Andrew Murray, CFO of Meruelo Maddox Properties, which in Downtown owns the Union Lofts, said he has come to a completely opposite conclusion than the report, at least when it comes to Downtown.
He said the report’s definition of Downtown is larger in scope than what most stakeholders think of the area, extending to Western Avenue and including projects such as Miramar Village, near Beverly Boulevard and Alvarado Street. He said that because of the halt in construction, new units coming on the market are likely to be quickly rented.
“When everything is full and there’s no new supply, then guess what? Rents are going to go up,” he said.
Indeed, some recently opened projects have been quickly finding tenants.
Less than two months after opening in January, and with little advertising, 27 of the 38 apartments in the Emil Brown Lofts at 308 E. Ninth St. had been rented, at prices of $1,200-$3,000 for 750-1,700-square-foot lofts. In the Arts District, the Brick Lofts opened in December, and three months later had filled 17 of its 21 units using ads on Craigslist and a banner outside the building.
The market has also been kind to Howard and Matt Klein, a father-son development team that opened the 51-unit Factory Place Arts Complex on Dec. 1
“I can say that we are now well over 50% rented in our new development, and are holding firm with our pricing,” Matt Klein said in an email. “Furthermore, we haven’t encountered anything that would lead us to believe that rents are going down this year.”
Shy, meanwhile, said he had 60 people on the waiting list when he began leasing his 25-story, 270-unit SB Tower in January. Rents in the building at 600 S. Spring St. range from $1,250-$2,800 for apartments that are 700-1,500 square feet.
Shy said about a year ago he was offering new tenants discounts of up to $300 at his various properties. Although prospective tenants are still asking for deals, Shy said he is now more likely to stand firm.
“I used to give discounts a year ago, but I don’t lower prices anymore,” he said.
Contact Richard Guzmán at
[email protected].
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