The Number

A report from Calabasas-based brokerage Marcus & Millichap Inc. estimates the average rent for an apartment in Los Angeles is $2,350, and the addition of nearly 15,000 new units won’t bring that number down. The report estimates 14,800 new apartments will come on the market because of construction this year. That follows last year, when 9,700 units debuted. Despite more inventory, which the report calls a “century-high volume of deliveries,” the vacancy rate is projected at 3.9 percent. In terms of geography, the report cites downtown L.A. as the biggest gainer of apartments with 8,000 new units this year. “An uptick in completions also occurs in the San Fernando Valley, where an extended period of tight vacancy has created pent-up demand,” the report states. If you think the new units will relieve the homeless crisis, think again. “New inventory largely caters to more affluent renters,” the report says in reference to national trends. Higher rents remain a relative bargain because of the gap between a mortgage payment and the monthly cost for an apartment. Rising interest rates, which negatively impact housing sales, benefit the market for apartments as fewer people can afford to buy a home. According to the report, the Los Angeles-Long Beach-Anaheim market has the lowest home ownership rate among the 50 largest metro areas in the country at 47.3 percent. The U.S. average is 64.4 percent. In the future, lifestyle shifts will tip preferences away from downtown apartments toward suburban units – such as those in the San Fernando Valley. “Millennials, now entering their late 30s, are starting to form families,” the report states. “As this trend plays out, the lower rents of suburban areas and the generally higher-quality schools have begun to win out over the urban lifestyle.”