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L.A. County Apartment Rents Projected to Climb 6% in 2004

March 31, 2004|Roger Vincent | Times Staff Writer

Los Angeles County rents will rise about 6% this year and an additional 7% next year because of a shortage of apartments, coupled with continued strong demand.

The average monthly rent for a one- or two-bedroom apartment will climb to about $1,327 this year, from $1,255 last year, according to the Casden Real Estate Economics Forecast, released Tuesday by the USC Lusk Center for Real Estate.

In 2005, the county's average monthly rent will climb to about $1,420, according to the forecast.

"We'll continue to see strong demand from tenants moving into Southern California, especially from young singles wanting efficiency units and larger Latino immigrant families needing three-bedroom apartments," said Raphael Bostic, director of the forecast. "The big problem is that there are just too few units available for people to move into right now."

The study found that almost every apartment on the market was rented. Average occupancy has topped 96% for the last two years and should reach 97% by 2005, the report said. Only once during the last four years did the occupancy rate for any type of unit fall below 95% -- three-bedroom units slipped below that mark at the end of the recession in 2001.

The sustained high occupancy is in strong contrast to the 1990s, when more volatile economic times coupled with much higher levels of construction produced wild swings in occupancy.

Rising rents have made Southern California the most sought-after region in the nation for investors, said Hessam Nadji of brokerage Marcus & Millichap. Fierce competition pushed the median per-unit price up 17% last year, to $95,000 in Los Angeles County.

Smaller complexes -- those with fewer than 20 units -- were particularly popular among investors. Such buildings accounted for 75% of all Los Angeles County apartment deals in 2003, with more than 2,000 transactions recorded, Nadji said.

One area that has been soft in rent increases and price hikes is the Westside. Though rents are about 50% above the county average, they have not climbed much in the last two years.

"It fell the furthest" of Los Angeles County markets after the tech boom collapse, Bostic said. "It's rebounding a bit, but you need significant job creation and income growth" to push rents much higher.

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