Los Angeles’s Rental Squeeze
Whether apartments or office space, Los Angeles is facing a tight rental market. Rents are rising and available space is becoming scarcer. The lack of new construction, the foreclosure crisis, and the uptick of young workers in the city have all contributed to increased demand for apartment space.
Rents on the Rise
Rent costs in Los Angeles County are expected to increase nearly 10 percent over the next two years. The 2012 Casden Multifamily Forecast estimates that the average rents for the county as a whole will increase 9.6 percent, to $2.04 a square foot, by the end of 2013. This acceleration in rent may be tempered if job growth does not improve, particularly if nagging unemployment numbers do not improve soon. While this phenomenon is not unique to the city, Los Angeles has been among the hardest hit metropolitan areas.
Los Angeles and the rest of Southern California are expected to experience rent increases due to an increased demand for apartments. A younger work force entering the job market, a slow in construction, along with foreclosures and short-sales have all come together to limit vacancies and increase rent expenses. During 2012, only 2,200 new apartment units were created in all of Los Angeles. Additionally, there is a trend for renters to gravitate toward apartment living over renting single-family homes, condos, or townhouses.
Single Family Homes
Single-family homes are an exception to the trend described above, as rents are stagnate or even dipping for these properties. A mixture of foreclosures and a surge of investors have increased the available supply of single-family homes. Investors have bought up foreclosures in order to convert them to rental properties. Some have speculated that in Los Angeles, investors have found a market worth $100 billion.
In the 3rd quarter of 2013, the office market has seen a slight drop in vacancy and a minute increase in monthly rents. Though office prices have stabilized since the start of the economic recovery, there has been little growth in available space. Office vacancies were at 17.5 percent at the quarter’s end, a drop from 18.4 percent from the previous year, and the average rent was $2.33 per square foot. This stagnation is attributed to the fact that employers are opting to pack more workers in their current office space in lieu of finding larger offices. Other estimates peg the vacancy rate at 20 percent.
Los Angeles provides protection to tenants by limiting how much and how often rents can be raised, as well imposing limits on fees. Landlords are required to give 30 days notice when raising rent by 10 percent or less and 60 days notice when raising rents by more than 10 percent. Rent control also protects tenants by requiring landlords to provide a reason for any eviction. Cities under these rent control laws include the city of Los Angeles, San Fernando Valley, Santa Monica, West Hollywood, and Beverly Hills.
Leonard Pickett is a freelance writer who focuses on real estate, home insurance, renters insurance and other kindred topics. Those interested in learning more about the latter should visit Protectyourbubble.com renters insurance.
Image credit goes to channone.