Comprehensive Market Analysis 2024

Publish date: Oct 10, 2024

The Los Angeles apartment market has shown remarkable resilience in 2024, offering unique opportunities for apartment owners and investors. This report dives into key trends, submarket performance, and actionable strategies for navigating the multifamily landscape in Los Angeles.

Download the 2024 Comprehensive Market Analysis Report (coming soon)

Highlights:

1. Resilience Amid Economic Challenges

The Los Angeles apartment market continues to demonstrate stability, buoyed by consistent rental demand and low vacancy rates. With a total sales volume of $7.1 billion, 1,755 properties sold, and 34,062 units transacted, the market remains a cornerstone for apartment owners seeking long-term investments.

2. Pricing Trends Reflect Stability

• Average Price Per Unit (PPU): $327,912
• Average Price Per Square Foot (PSF): $394.49

Premium areas like Santa Monica and Beverly Hills maintain top-tier pricing, while emerging neighborhoods such as South Los Angeles and Panorama City offer affordable, high-yield opportunities.

3. Suburban Growth Drives Demand

Suburban markets like Long Beach and Inglewood are gaining traction, combining lower entry costs with robust rental growth and redevelopment projects. These areas are prime targets for apartment owners seeking strong returns.

Market Trends in Los Angeles Apartments

Top Submarkets by Transaction Volume

Rental Demand and Vacancy Rates

• Countywide Vacancy Rate: 4.8%
• Premium Submarkets: Beverly Hills and Santa Monica maintain vacancy rates below 3%, demonstrating strong tenant demand.

New Construction Pipeline

Approximately 12,000 new apartment units are expected in 2024, with a focus on Downtown Los Angeles, Hollywood, and Long Beach. This pipeline caters to luxury and mid-market renters, balancing new supply with consistent demand.

Regulatory Landscape for Apartment Owners

Opportunities in Density-Friendly Policies

Policies like AB 2011 and SB 684 simplify approvals for high-density housing, allowing apartment owners to unlock new development opportunities in underutilized areas.

Challenges from Rent Control

Rent control policies in Los Angeles, including limits on annual rent increases, continue to impact operating income. Apartment owners should focus on operational efficiencies and explore value-add strategies to maintain profitability.

Source: California Department of Housing and Community Development

Outlook for 2025

Opportunities and Challenges in the Los Angeles Apartment Market

As 2024 comes to a close, the Los Angeles apartment market is poised for a dynamic year ahead. Key trends and evolving conditions provide a glimpse into what apartment owners and investors can expect in 2025.

Continued Demand Amid Economic Uncertainty

• Tenant Demand: Rental demand is expected to remain strong, driven by limited housing supply, steady population growth, and a high cost of homeownership.
• Vacancy Rates: With vacancy rates hovering around 4.8%, Los Angeles will continue to see tight rental markets, particularly in premium areas like Beverly Hills and Santa Monica.
• Investor Focus: Apartment owners will likely prioritize retaining tenants through competitive rental pricing and upgraded amenities to maintain high occupancy levels.

New Construction to Increase Competition

• New Units Coming Online: Over 12,000 multifamily units are expected to be delivered in 2025, adding competition in core submarkets such as Downtown Los Angeles, Hollywood, and Long Beach.
• Luxury Segment Saturation: The majority of new developments target luxury tenants, potentially softening rental rates in this segment while creating opportunities for mid-market properties to thrive.
• Emerging Suburban Markets: Suburban areas like South Los Angeles and Panorama City are expected to absorb much of the demand as renters look for affordability and convenience.

Regulatory Challenges to Shape Investment Strategy

• Potential Policy Changes: Ongoing discussions around statewide rent control and tenant protections could impose stricter limitations on annual rent increases. Apartment owners should closely monitor these developments.
• Density-Focused Initiatives: Policies like SB 684 will continue to promote housing density, creating opportunities for redevelopment and new construction projects.

Source: California Department of Housing

Financial Landscape: Rising Costs and Repricing Opportunities

• Interest Rates: Elevated interest rates may persist into 2025, leading to further repricing of multifamily assets. Investors with strong capital reserves can take advantage of these opportunities.
• Operating Costs: Rising property taxes, insurance premiums, and utility costs will require apartment owners to focus on operational efficiencies.
• Cap Rates: Expanding cap rates may provide higher returns for investors, especially in suburban and emerging markets.

Strategic Recommendations for 2025

1. Leverage New Development Opportunities: Explore density-friendly policies and invest in areas with untapped potential for housing growth.
2. Prioritize Operational Efficiency: Implement cost-saving technologies and streamline property management processes to offset rising expenses.
3. Target High-Demand Submarkets: Focus on neighborhoods with low vacancy rates and strong rental growth to maximize returns.
4. Monitor Policy Changes: Stay ahead of regulatory shifts to adapt your strategy and ensure compliance with evolving rent control measures.
   
   

2025 promises a mix of opportunities and challenges for Los Angeles apartment owners and investors. By staying informed and proactive, you can navigate the market effectively and position your investments for long-term success.

If you’re curious about the current value of your property, or want to talk through your  strategy for 2025, let's chat.

Ready to explore more? Download the 2024 Los Angeles Multifamily Comprehensive Market Report (coming soon).

Taylor Avakian is a multifamily investment expert and the host of No Vacancy, a podcast dedicated to exploring the latest trends, strategies, and insights in the real estate market. As the founder of The Group CRE, Taylor specializes in helping landlords and investors navigate the complexities of multifamily ownership in Los Angeles.