Market Overview
The Los Angeles apartment market is comprised of 864,197 units in thirty-seven geographic concentrations ranging in size from the 62,684 unit Hollywood/Silver Lake submarket to the Tujunga/La Crescenta/Montrose submarket, which amounts to 5,448 units. In the ten-year period beginning with Q2 2014, the Downtown submarket has experienced the greatest introduction of new inventory, 19,373 units, amounting to 21.7% of all new market rate rentals added to the market.
Asking and Effective Rent
After finishing April with no change, asking rents climbed by 0.3% to $2,381. Mean unit prices in the metro are as follows: studios $1,687, one bedrooms $2,168, two bedrooms $2,730, and three bedrooms $3,384. Over the past twelve months, asking rents have fallen a total of 2.7%, down from $2,446. Since the beginning of Q2 2014, the metro as a whole has recorded an annual average increase of 4.5%. Effective rents, which exclude the value of concessions offered to prospective tenants, climbed by 0.2% during May to an average of $2,286. The asking rent growth rate decline of 2.7% observed over the past 12 months compares unfavorably to the long-term performance of the metro, and rent growth deceleration has been shared broadly among the Los Angeles metropolitan area's thirty-seven apartment submarkets.
Competitive Inventory, Household Formations, Absorption
The first quarter added 6,770 net new households to the Los Angeles MSA. Of course, not all newly formed households immediately become apartment renters, but an analysis of longer-term economic and demographic trends can be useful in understanding the current quarter's level of demand. Since the beginning of Q2 2014, household formations in Los Angeles have averaged 0.2% per year, representing the average annual addition of 7,800 households. During May, net absorption totaled 52 units, while there was no new development; the net effect of absorption and construction dynamics caused the vacancy rate to remain unchanged. Over the last 12 months, market absorption totaled 6,376 units, 17.7% lower than the average annual absorption rate of 7,750 units recorded since the beginning of Q2 2014. In a long-term context, May vacancy rate is 0.3 percentage points higher than the 3.8% average recorded since the beginning of Q2 2014.
Outlook
REIS' new construction analysts report that 12,219 units of new speculative apartment inventory will be introduced to the metro by the end of the year, and net total absorption will be positive 3,047 units. In response, the vacancy rate will drift upward by 0.3 percentage points to 4.4%. During 2025 and 2026, construction activity under surveillance is projected to deliver a total of 21,982 units. Net new household formations at the metro level during 2025 and 2026 are projected to average 0.6% annually, enough to facilitate an absorption rate averaging 10,964 units per year. The market vacancy rate will finish 2025 at 4.6% and will fall 0.3 percentage points to 4.3% by year end 2026. Between now and year-end 2024 asking rents are expected to climb 1.6% to a level of $2,420, while effective rents will increase by 1.5% to $2,321. On an annualized basis, asking and effective rents are projected to rise at a rate of 3.0% through year end 2026, reaching average rates of $2,569 and $2,462 per unit, respectively.
Market Overview
The Los Angeles office market is comprised of 210.4 million square feet in twenty-one geographic concentrations ranging in size from the 38.9 million square foot Downtown submarket to the Mid-Cities submarket, which accounts for 1.8 million square feet. In the ten-year period beginning with Q2 2014, the Downtown submarket has experienced the greatest introduction of new inventory, 3.3 million square feet, amounting to 20.5% of all new competitive stock added to the market.
Asking and Effective Rent
During May, the metro's asking rent remained unchanged at $42.24. Since the same reporting period last year, asking rents have climbed by 0.8%, up from $41.89. Since the beginning of Q2 2014, the metro as a whole has recorded an annual average increase of 2.4%. Effective rents, which exclude the value of concessions offered to prospective tenants, increased by 0.1% during May to an average of $33.67. Although all of the Los Angeles metropolitan area's twenty-one office submarkets contributed to the metro's recent rent growth, it is worth noting that the 0.8% asking rent growth rate of the past 12 months compares unfavorably to the metro's long term performance.
Competitive Inventory, Employment, Absorption
Total employment in the Los Angeles metropolitan area increased by 14,200 jobs during the first quarter, representing a growth rate of 0.3%, while in the dominant office-using industries, employment grew by 4,600. Absorption rates of competitive office space may not immediately reflect quarterly total job gains or losses, but it is prudent to consider longer-term economic and demographic performance as influential upon current occupancy levels. Since the beginning of Q2 2014, the average growth rate for office-using employment in Los Angeles has been 0.7% per year, representing the average annual addition of 9,200 jobs. During May, leasing activity generated 48,000 square feet of absorption. Over the last 12 months, market absorption totaled negative 1.3 million square feet; by comparison, the average annual absorption rate recorded since the beginning of Q2 2014 is 598,200 square feet. The net increase in vacancy from one year ago is 70 basis points to a level of 18.4%. From an historical perspective, May vacancy rate is 3.0 percentage points higher than the 15.4% average recorded since the beginning of Q2 2014.
Outlook
Reis is tracking office construction activity that will deliver 1.2 million square feet to the metro by the end of the year, and net total absorption will be positive 640,000 square feet. As a result, the vacancy rate will drift upward by 0.2 percentage points to 18.6%. During 2025 and 2026, construction activity under surveillance is projected to deliver a total of 2.8 million square feet. Office employment growth at the metro level during 2025 and 2026 is expected to average 0.3% annually, enough to facilitate an absorption rate averaging 1.9 million square feet per year. The market vacancy rate will finish 2025 at 18.3% and will decline 0.4 percentage points to 17.9% by year end 2026. Between now and year-end 2024 asking rents are expected to rise 0.9% to a level of $42.60, while effective rents will advance by 0.4% to $33.82. On an annualized basis through 2025 and 2026, asking and effective rents are expected to increase by 1.7% and 1.9%, respectively, to finish 2026 at $44.10 and $35.15.
Market Overview
The Los Angeles retail market showed signs of stability in Q1 2024, with asking rents holding steady at $34.21 per square foot and vacancy rates remaining unchanged at 8.1%. The market absorbed -19,000 square feet in Q1, indicating slightly negative demand. Overall inventory stayed flat at 69,464,000 square feet, with no new completions in the quarter.
Asking and Effective Rent
Asking rents in Los Angeles declined marginally by 0.1% quarter-over-quarter to $34.21 per square foot in Q1 2024. Effective rents, which account for landlord concessions, remained flat at $30.03 per square foot. Year-over-year, asking rents have increased by 0.4% from Q1 2023.
The spread between asking and effective rents has narrowed slightly over the past year, suggesting landlords are offering fewer concessions as the market stabilizes. Premium properties in submarkets like Santa Monica/Westside and Culver City continue to command the highest rents, often exceeding $45 per square foot.
Competitive Inventory, Employment, Absorption
Total retail inventory in Los Angeles held steady at 69,464,000 square feet in Q1 2024. No new space was completed during the quarter, compared to 8,000 square feet delivered in Q4 2023.
Net absorption was negative in Q1 at -19,000 square feet, reversing the positive trend seen in previous quarters. This resulted in a slight uptick in vacant stock to 5,626,000 square feet.
Employment growth in Los Angeles was modest at 0.3%, slightly below the national average. This tepid job growth may be contributing to the soft demand for retail space.
Market Outlook
The forecast for the Los Angeles retail market is cautiously optimistic:
• Asking rents are projected to grow by 1.3% in 2024, accelerating to 1.7% in 2025 and 2.0% annually from 2026-2028.
• Vacancy rates are expected to gradually decline, reaching 7.2% by 2028.
• New construction is likely to remain limited, with inventory growth forecast at 0.5% in 2024, declining to 0.2-0.4% annually through 2028.
However, downside risks remain. In a pessimistic scenario, rent growth could slow to 0.0% in 2024 and potentially turn negative in 2025. Vacancy rates may also rise slightly under this scenario.
The retail market's performance will depend heavily on broader economic trends, particularly employment growth and consumer spending patterns. Continued adaptation to e-commerce competition will be crucial for brick-and-mortar retailers. Prime locations and experiential retail concepts are likely to outperform in the coming years.
California Senate Bill 567 (SB 567) allows for "Just Cause" Eviction if a landlord will "Substantially Remodel" a property: https://oag.ca.gov/system/files/media/Tenant-Protection-Act-...:
"When may a tenant be evicted based on demolition or substantial remodel? A tenant may only be evicted on this basis if the property is being demolished or if renovations will a) substantially modify or replace a structural, plumbing, electrical, or mechanical system, and require permits, or b) remove unsafe materials, such as lead paint, mold, or asbestos, from the unit. Additionally, the work must require the tenant be out of the unit for at least 30 consecutive days in order for the work to be safely completed. SB 567 clarifies that a tenant is not required to vacate the unit on any days where they could continue living there without violating health, safety, and habitability codes and laws. In other words, the safety risk must be present for all 30 of those days to justify eviction. Under SB 567, the notice to terminate tenancy must include a description of the work to be completed, copies of required permits, the date the owner expects to complete the work or demolish the building, and notification that if the substantial remodel or demolition is not commenced or completed, the tenant must be offered the opportunity to re-rent the unit at the same rent and lease terms as when the tenant left. (Civil Code § 1946.2(b)(2)(D).)"
Does this mean that a landlord can theoretically evict all tenants of a multifamily property if he has plans/permits approved to "substantially remodel" the building?
Has anyone evicted a tenant under these circumstances?
Apparently there are some cities in LA County like Santa Monica and Inglewood which do not allow this.
How do you check which cities allow/disallow SB 567 "just cause" eviction through "substantial remodels?"
Market Overview
The Los Angeles hospitality market showed strong recovery and growth in Q1 2024, with key performance indicators demonstrating significant improvement from the previous year. The average daily rate (ADR) reached $199.65, a 5.5% increase from Q4 2023, while revenue per available room (RevPAR) grew by 5.6% to $147.84. Occupancy rates remained robust at 74.1%, outperforming the national average by 0.9 percentage points.
Asking and Effective Rent (ADR and RevPAR)
ADR for all tiers is projected to grow steadily over the next few years:
- 2024: $193
- 2025: $197
- 2026: $200
- 2027: $204
- 2028: $209
RevPAR is also expected to show consistent growth:
- 2024: $155
- 2025: $160
- 2026: $163
- 2027: $166
- 2028: $169
Upper-tier properties command a significant premium, with ADR forecast to be $233 in 2024, compared to $122 for lower-tier properties. This gap is expected to widen over time, reaching $251 vs. $133 by 2028.
Competitive Inventory, Employment, Absorption
The Los Angeles hotel market comprises a diverse mix of brands, with Marriott (44.5%) and Hilton (28.2%) dominating market share. Other significant players include IHG (10.5%), G6 (4.9%), and Choice (4.8%).
Total room inventory has been relatively stable, with slight fluctuations:
- January 2024: 103,379 rooms
- February 2024: 107,068 rooms
- March 2024: 103,353 rooms
Employment trends show gradual improvement:
- 2024 projected employment growth: 0.9%
- 2025 projected employment growth: 0.5%
While population growth is expected to remain flat, household income is forecast to grow by 4.4% in 2024 and 3.5% in 2025, potentially supporting increased travel and hotel demand.
Market Outlook
The Los Angeles hospitality market is poised for continued growth and stability:
1. Occupancy rates are projected to remain strong, stabilizing around 81% for all tiers by 2025-2028.
2. ADR and RevPAR are expected to grow steadily, with upper-tier properties seeing slightly higher growth rates.
3. The market is likely to benefit from improving economic conditions, including rising household incomes and stable employment growth.
4. Limited new supply additions suggest that existing properties may continue to enjoy favorable market conditions.
5. The gradual recovery of international travel and tourism could provide additional upside for the market, particularly for upper-tier properties.
However, potential headwinds include:"
- Flat population growth, which may limit organic demand increases
- Economic uncertainties that could impact both business and leisure travel
Overall, the Los Angeles hospitality market appears well-positioned for sustained performance improvement over the next several years, with upper-tier properties likely to see the strongest gains in ADR and RevPAR.
Full Market Report: https://d2saw6je89goi1.cloudfront.net/uploads/digital_asset/...
Contact me for a complimentary market valuation analysis report for your hospitality property today.
#CommercialRealEstate #HospitalityRealEstate #HotelRealEstate #HotelForSale #CRE
Market Overview
The Los Angeles self-storage market showed signs of stabilization in Q1 2024 after experiencing some softening in 2023. The market vacancy rate held steady at 11.6% compared to Q4 2023, while asking rents declined slightly by 0.5% quarter-over-quarter to $234 per unit. Despite recent challenges, Los Angeles continues to outperform the broader Western region, which had a higher vacancy rate of 11.9% and lower average asking rent of $178 per unit in Q1 2024.
Asking and Effective Rent
Asking rents in Los Angeles decreased marginally by 0.5% in Q1 2024 to $234 per unit, following a more substantial 2.8% decline in Q4 2023. This suggests the rate of rent decline is slowing. Effective rents mirrored asking rents at $234 per unit, indicating limited use of concessions. Climate-controlled units commanded a premium, with asking rents of $271 per unit compared to $234 for non-climate-controlled units. Los Angeles rents remain well above the Western regional average of $178 per unit for non-climate-controlled and $191 for climate-controlled units.
Competitive Inventory, Employment, Absorption
New inventory additions slowed in Q1 2024, with only 969 units delivered compared to over 1,000 units per quarter throughout 2023. The market absorbed 664 units in Q1 2024, a positive sign after negative absorption in the latter half of 2023. However, this was below the 5-year average annual absorption of around 5,000 units.
Employment growth is forecast to be modest at 0.9% in 2024 and 0.5% in 2025, which may limit demand growth. Population growth is expected to be flat over the next few years, potentially constraining household formation and storage demand.
Market Outlook
The Los Angeles self-storage market is projected to improve gradually over the next few years:
- Vacancy rates are forecast to decline from 11.6% in 2023 to 10.5% by the end of 2024 and further to 9.4% in 2025.
- Asking rents are expected to grow by 1.0% in 2025 and 1.2% in 2026, a turnaround from the slight decline projected for 2024.
- New supply is expected to moderate, with inventory growth slowing from 5.4% in 2024 to just 0.5% in 2025.
While the market faces near-term headwinds from slow economic and population growth, the moderation in new supply and gradual absorption of existing inventory should support improved market fundamentals over the next 2-3 years. Investors and operators should monitor employment trends and household formation as key demand drivers going forward.
Market Overview
The Los Angeles warehouse/distribution market is comprised of 476.3 million square feet in eight geographic concentrations ranging in size from the 128.0 million square foot Mid-Cities submarket to the San Fernando Valley West submarket, which accounts for 6.6 million square feet. In the ten-year period beginning with Q2 2014, the South Bay submarket has experienced the greatest introduction of new inventory, 8.3 million square feet, amounting to 27.8% of all new competitive stock added to the market.
Asking and Effective Rent
During May, asking rents built upon April's 0.2% decrease, declining by an additional 0.2% to $12.82. The market has now experienced six consecutive monthly declines in asking rent, for a cumulative total of 1.2%. Since the beginning of Q2 2014, the metro as a whole has recorded an annual average increase of 7.5%. Effective rents, which exclude the value of concessions offered to prospective tenants, also declined by 0.2% during May. The identical rates of change suggest that, although rents drifted downward, landlords have avoided increasing the relative value of incentives packages used to attract and retain lessees. The asking rent growth rate of the metro's eight underlying submarkets over the past 12 months has been mixed, with cumulative change rates ranging from 1.9% (San Gabriel Valley) to -3.0% (South Bay).
Competitive Inventory, Employment, Absorption
Total employment in the Los Angeles metropolitan area increased by 14,200 jobs during the first quarter, representing a growth rate of 0.3%, while industrial employment contracted by 2,043. Since the beginning of Q2 2014, the average growth rate for industrial-using employment in Los Angeles has been -1.1% per year, representing the average annual loss of 6,824 jobs. The metro experienced negative absorption of 935,000 square feet during May. Over the last 12 months, market absorption totaled negative 7.8 million square feet; by comparison, the average annual absorption rate recorded since the beginning of Q2 2014 is 4.3 million square feet. In a long-term context, May vacancy rate is 0.5 percentage points lower than the 4.8% average recorded since the beginning of Q2 2014.
Market Outlook
REIS's new construction analysts report that 6.9 million square feet of new multi-tenant warehouse/distribution inventory will be introduced to the metro by the end of the year, and net total absorption will be positive 9.1 million square feet. As a result, the vacancy rate will drift downward by 0.5 percentage points to 3.8%. During 2025 and 2026, construction activity under surveillance is projected to deliver a total of 14.6 million square feet. Industrial employment growth at the metro level during 2025 and 2026 is projected to be essentially flat, but over the same period positive absorption will average 7.3 million square feet per year. The market vacancy rate will finish 2025 at 3.8% and will decline 0.1 percentage points to 3.7% by year end 2026. Between now and year-end 2024 asking rents are expected to rise 4.1% to a level of $13.35, while effective rents will advance by 4.5% to $12.89. On an annualized basis through 2025 and 2026, asking and effective rents are anticipated to climb by 3.7% and 3.8%, respectively, to finish 2026 at $14.35 and $13.88.
Hello Charlice, I am a private money loan broker in Los Angeles with some clients seeking 100% financing with joint venture. I just sent you a message.