As you may have experienced for yourself, apartment rents in Los Angeles softened in 2023 with the outlook for rent growth in LA for the coming year looking modest at best. Apartmentlist.com and CoStar recently released 2023 Los Angeles Rent Data outlining apartment rental trends for the Los Angeles Metropolitan area and Greater Southern California. Below is a breakdown:
LA Rents By the Numbers
Median Rent for Los Angeles: Median rent currently sits at $1,849/mo for a 1-BR unit while median rent for a 2-BR currently sits at $2,357/mo.
Rent Growth/Contraction: Currently Los Angeles rents are down -1.1% month-over-month from Dec 2023 to Jan 2024, and down -3.8% year-over-year when comparing 2023 as a whole to 2022. The median rent in Los Angeles fell by -1.1% over the course of December 2023, and has now decreased by a total of 3.8% over the past 12 months.
What’s Happening:
New Supply, Soft Demand: Meager growth resulted from a below-average renter demand last year of 4,800 units, in the face of over 11,000 new units added. Based on data collected by the U.S. Census Bureau between July 1, 2022, and July 1, 2023, Los Angeles County saw modest outmigration, with the population declining by 0.15%, a critical factor in recent lackluster renter activity. Vacancy ended the year at 5%. While still one of the tightest apartment markets nationally, vacancy in the metro is above its long-term average of 4.5%.
Other SoCal Areas Defy Odds: Orange County, California, leads U.S. markets at the beginning of 2024 with a nearly 4% annual increase in apartment rents. As a 2023 rebound in rental demand balanced an equal increase in new apartment supply, landlords in Orange County maintained leverage to increase rents.
2024 Forecast:
LA Lags Other SoCal Areas: The outlook for 2024 suggests that average market rents will increase by approximately 4% in Orange County, San Diego and the Inland Empire, and by a more moderate 2.8% in Los Angeles as occupancy growth increases across all markets. Furthermore, only the Inland Empire is expected to see an increase in deliveries in 2024 compared to 2023.
New Construction Starts Sluggish: Developers are initiating construction projects at a slower pace as higher capital costs have curtailed project feasibility. Across the four major Southern California markets, approximately 16,300 market rate units started construction in 2023. The pace of construction starts has decelerated for two consecutive years from a cyclical peak and record 23,200 units in 2021. As a result, weaker supply growth in the near-term combined with stronger demand could lead to tighter vacancies and stronger rent growth.
Sources: Costar. Apartmentlist.com
