Named as the 4th most expensive rental market in the nation, Los Angeles is a desirable location to own an apartment building. Currently, the occupancy rate in Los Angeles is at 93.6% and rent growth is at 4.9%. Rent is continuing to grow and increase, especially in emerging markets such as San Bernardino, Orange County, and San Diego. The average rent for an apartment in Los Angeles is $2,251, as compared to 2017 where the average rent was $2,142 (Source).
Unsurprisingly, Santa Monica, Venice, and Marina Del Rey ranked as the most expensive areas with rents close to $3,000. On the contrary, the most affordable areas for renters were Central Alameda, South Central LA, and Florence Graham.
The unemployment rate is at a record low of 3.8% – this is the lowest it has been since 2000. However, workers have yet to see wage growth. Explanations for no wage growth can be explained by the economy being more service-based than product based and also baby boomers are retiring at higher wages, leaving less room for younger workers to experience wage growth. In addition, globalization and automation have made it easier for businesses to cut labor costs and replace workers with technology and machines.
At the moment, Millennials are the cornerstone of apartment demand. Around 68% of Millennials live in apartments and the shift to homeownership hasn’t quite happened yet for them. Millennials are staying in their units longer than they used to and signing longer leases. Those who cannot afford the high rents in Los Angeles are migrating to lower cost of living areas. However, the housing problem in Los Angeles remains ever-present. Los Angeles has a surplus of luxury apartments yet affordable housing is lacking and developers have a low incentive to create affordable housing projects.
The Los Angeles rental market is experiencing a digital transformation. In the last 30 days, over 3,000 apartment applications were submitted online; and in the last 60 days, ~48% of tenants paid their rent online. The rental market is shifting to digital and gone are the days of paper applications and rent checks. 80% of internet users own a smartphone and 75% of renters contact communities using mobile. Do you have a website for your property? Is that website optimized for mobile? These are questions you should be asking yourself if you want to attract quality renters. Additionally, there has been a 64% increase in mobile internet users from age 45-54. It isn’t just Millennials who are using mobile to search for apartments; the average renter today is 46 years old. Adapting to changing technology is vital to stay competitive in the Los Angeles rental market.