'We’ve Seen The Bottom': Leasing Activity, Fewer Concessions Spark Optimism In LA Multifamily Owners
Generous concessions and falling occupancy rates in Los Angeles and in many big, expensive urban areas across the country was a theme of 2020, but to hear multifamily owners tell it, those days are in the rearview mirror.
“We've seen an enormous resurgence in leasing activity over the last four to six weeks, and in particular in this last month," said Jamison Realty CEO Jaime Lee, whose company has properties in dense LA neighborhoods like Koreatown and Downtown.
Lee spoke at The Outlook of Market-Rate Multifamily in LA panel at The State of Los Angeles Multifamily Bisnow digital summit. Property owners on the panel said they were seeing a resurgence of leasing activity and tours at their properties in LA and were seeing a decrease in the need for concessions.
Universe Holdings CEO and Chairman Henry Manoucheri said that since Hollywood and its industries have begun to return to work, he has noticed a marked change in interest in his properties.
"In the past 30 days, all of a sudden, it's like the sea split and we see a wave of renters coming in,” Manoucheri said. He said his company has “a record amount of leases” in buildings that, until recently, had occupancy of 80% or 85%.
Lee said more than 30% of tours at Jamison's properties, especially virtual tours, were for people who left LA because of the coronavirus pandemic and are looking to return because they have to go or anticipate having to go back into the office.
Brookfield Properties Vice President of Mixed-Use Development Patrick Rhodes said that in most of the urban markets where Brookfield operates, LA included, concessions of free rent peaked in the six-to-eight-week range. Those concessions worked, and Brookfield kept occupancy above 90% in all assets, Rhodes said.
But now that progress is being made on holding the coronavirus at bay, Rhodes has seen positive rent growth at Brookfield properties since early 2021 and a drop in the length of those concessions down to two to five weeks, depending on the asset and submarket.
"We've seen the bottom,” Rhodes said.
There is still a way to go to get back to the top. The Los Angeles County apartment vacancy rate is 5.8%, a decrease from its 6.2% peak in November, according to CoStar data reported by the Los Angeles Times. The median rent in the county, at $1,776 a month in May, is 2.7% lower than it was in February 2020, the Times said, citing ApartmentList data.
Nationally, multifamily rents grew 1.6% year-over-year in April — the largest percentage increase since March 2020, when the pandemic began.
Panelists said that the return to pre-pandemic apartment demand would not be immediate, despite statewide reopening measures, but were buoyed by early positive indicators.
"Real-time data has been super helpful to think about how to course-correct and think about apartment consumption in a post-Covid world," Rhodes said. "What we really believe in is this recovery of urban markets."
Lee, Rhodes and Manoucheri were joined on the panel by CallisonRTKL associate principal Mark Nay and moderator Elizabeth Dryden, partner at Ervin Cohen & Jessup LLP.
