Los Angeles Multifamily Vacancy

Apartment Vacancy Continues to Rise in Major Metropolitan Areas

If you own a multifamily property in Los Angeles, chances are that in the last 12 months (during the global pandemic), you have dealt with some component of vacancy at your property.  We expect this trend to continue at least through 2021.   

Here is why:

Why vacancy rates are expected to rise in 2021:

1. New Supply Being Delivered to Market:  More than 396,000 apartment units were delivered in 2020, a peak year for deliveries, according to Dodge Data & Analytics Supply Track. Another 506,637 are anticipated to be delivered in 2021. However, it is possible given labor and material shortages that not all of those apartments will be completed this year. The cities with the highest levels of apartment construction underway now include New York, Washington, Dallas, Houston, Los Angeles and Seattle, according to Dodge.

2. Demand is Down:  Demand, particularly for Class A apartments in prime urban locations, dropped precipitously early in the pandemic as young adults left to move in with their parents and tenants moved to the suburbs in search of more living space, less density and lower rent. Working remotely and the lack of availability of urban amenities during the pandemic meant renters were more likely to move away from expensive downtown locations. Those renters are not anticipated to return to their offices – at least not full-time – until later in 2021 or perhaps 2022.

3. Disconnect Between Demand and Supply:  While demand is expected to remain strong for Class B and Class C apartments, especially in markets with relatively steady employment, new supply is primarily Class A apartments in already saturated markets where demand is down.

4. Uneven Performance by Market: Vacancy rates also vary by market. Class A apartments in prime urban markets, particularly in gateway cities, are not expected to recover until 2022, according to market analysis by CBRE. But markets in the Midwest and South, which didn’t deteriorate as much in 2020, are anticipated to have lower vacancy rates in 2021.

5. Job Growth Won’t Replace 2020 Job Losses:  Fannie Mae’s economic forecast expects job growth of 5.5% by the end of 2021, but even that estimated 7.9 million new jobs won’t make up for the estimated 9.3 million jobs lost in 2020. Fannie Mae expects it will be 2022 before those jobs are replaced and before demand will increase substantially for apartments.

Why vacancy rates will improve in 2022

The U.S. economy will begin rebounding in 2021, particularly as vaccinations become more widespread. That rebound is anticipated to accelerate in 2022. By late 2021 and into 2022, job growth is anticipated by Moody’s Analytics to increase in Austin, Dallas and Phoenix, which should increase multifamily demand. All three cities have a significant amount of supply, but demand is strong enough to absorb that supply. Other cities where employment recovery levels by the fourth quarter of 2021 are expected to be strong include Salt Lake City, Indianapolis, Houston, Denver, Atlanta, San Antonio and Jacksonville. Cities with lower expected employment recovery include Pittsburgh, Chicago, Los Angeles, New York, Orlando, Providence, San Francisco, Cleveland, Detroit and Las Vegas.

LA Soft Story Ordinance

What You Need to Know About the Los Angeles Soft Story Building Earthquake Retrofit Ordinance


Chances are, before 2015 you may not have even heard of the term “soft story building.”  However by now, if you own multifamily property in Los Angeles, the city-wide soft story ordinance is pretty much all you are hearing about.  In November of 2015, Los Angeles Mayor, Eric Garcetti, passed the most sweeping mandatory seismic regulation in the nation ordering some 14,000 soft story apartment properties built before January 1, 1978 to undergo significant earthquake retrofitting to prevent buildings from crumbling as a result of violent shaking from an earthquake.

What is a soft-story building?

A soft-story building is a structure which has a weaker first floor and is unable to carry the weight of the stories above during an earthquake. The first floor generally would have large openings in the perimeter walls such as garages, tuck under parking or even large windows.

Buildings that are most vulnerable have been identified with the following criteria:

  • Consist of 2 or more stories wood frame construction
  • Built under building code standards enacted before January 1, 1978
  • Contains ground floor parking or other similar open floor space

***The program does not apply to residential buildings with 3 or less units.

Notices to owners will go out in the following phases:

Phase I.  Buildings with 16 or more dwelling units

  • 3-story and above – May 2, 2016
  • Condos/Commercial – Oct 30, 2017

Phase II.  Buildings with 3 or more stories

  • With less than 16 units – Oct 17, 2016

Phase III.  Buildings not falling within the definition of Priority I or II

  • With 9-15 units – Jan 30, 2017
  • With 4-6 units – Aug 14, 2017
  • With 7-8 units – May 29, 2017
  • 2-story – July 22, 2016

Timing of compliance:

From the receipt of the Order to Comply, qualifying soft story building owners must:

Within 2 years: Submit proof of previous retrofit, or plans to retrofit or demolish
Within 3.5 years: Obtain permit to start construction or demolition
Within 7 years: Complete construction

For further information, please visit this dedicated soft story ordinance website for the Los Angeles Department of Building and Safety.


Why This Page Exists…

This blog was created this as an information hub for multifamily apartment landlords across the Greater Los Angeles area.  I hope that the information you find here will be useful in the  day-to-day operations of your properties.