DTLA Resembles Manhattan: Too Many Apartments

More than 4,000 new apartments are forecast to deliver to the Los Angeles market in Q1 2018, according to research from the CoStar Group Inc. Much of that construction is concentrated in downtown Los Angeles, or DTLA, as it’s known, which could lead to a supply glut similar to what is going on in Manhattan.

It’s easier to build in downtown than in other parts of the region, and almost all the new deliveries will be at the market’s higher end. Rents in downtown are already among the highest in L.A. County. However, the new supply is exerting some pressure on rent growth, while boosting some concessions, such as six weeks of free rent.

According to preliminary Q4 2017 figures from Reis Inc., effective rent growth in the Los Angeles area was 4.2%, with the vacancy rate at 3.3%. Still, CoStar analyst Steve Basham told Bloomberg that supply in L.A. is about to hit the cycle’s peak.

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