Los Angeles, notorious for its lack of housing, is about to get more than 17,000 rental units this year.
But that doesn’t mean affordability will improve. Instead, rents will rise and vacancies along with it, according to a new report from commercial brokerage Marcus & Millichap.
Rents are expected to rise to $2,200 per month in 2018, a 6.3 percent increase from last year. That’s largely due to the onset of luxury units on the market and a continued confidence in the market, the Los Angeles Business Journal reported.
Vacancy will also rise to 5.2 percent as developers ramp up production on multifamily units. Downtown L.A. and the adjacent Mid-Wilshire neighborhood will receive the largest influx of units, according to the report. The study also cited employment figures that estimated 53,000 new workers in L.A. this year, up 1.2 percent from last year.
Other neighborhoods that can expect new apartments in the future include Hollywood, Marina del Rey and Glendale. The vacancy rate will likely remain at or below 4 percent in those areas, likely because the rent levels will be lower.
Investment in the area will also migrate to non-traditional places like Glendale and Pasadena, as private investors find higher yields and employment hubs.
Other areas like Santa Monica will continue to draw institutional investors, as low supply and high demand keep that so-called Silicon Beach market hot. Vacancy rates there bottom out below 3 percent.