JLL’s Benton: What to Make of L.A.’s Strong Apartment Market

By Dennis Kaiser

Connect Apartments is coming up next week in Los Angeles. The conference features a host of commercial real estate experts who will cover a wide range of topics including California’s housing issues, the economy, institutional investment, multifamily finance, development and how apartment leaders are getting deals done today.

Leading up to the event, Connect Media asked JLL’s Chris Benton, a Senior Vice President in the firm’s Capital Markets Multifamily group, to share his thoughts about the multifamily market. Check out our latest 3 CRE Q&A to hear about the challenges and opportunities, considerations investors must weigh today and what assets are in favor.

Q: What are some of the overarching trends you see driving the apartment market as the year progresses?
A: On the demand side, the jobs story in Los Angeles remains strong, the spike in housing prices is lapping wage growth and you have large portions of the country’s two largest generations, millennials (72m) and baby boomers (73m), considering renting, albeit for very different reasons. On the supply side, L.A. continues to be an incredibly hard market to develop in (e.g. the sidelining of SB 50), developers/owners continue to deliver high quality product that meets renters’ needs and development costs continue to rise, albeit at a slower pace than the rest of the country.

Q: How can and should multifamily investors approach their decisions today, given the length of the cycle, interest rates and overall economic conditions?
A: Multifamily continues to be considered a relatively safe space by both domestic and offshore capital; this was seen in the 15+ percent and 10+ percent increases in 2018 and Q1 2019 transaction volumes, respectively. I won’t try to predict what the Fed will do over the next 3 – 18 months. What I will say is that although it’s fantastic that there most likely won’t be a rate hike in the near future, rates are at historic lows and an additional cut isn’t likely to result in significant change.

Q: What are some examples of the types of assets or deals you are looking at and why?
A: Recently, we’ve been working on several creative projects. Most recently, we worked on an office-to-multifamily adaptive reuse in a development-friendly submarket, and a value-add play in a unique submarket, that will appeal to a variety of buyers on paper but will ultimately require someone that’s willing to invest outside the box.

For comments, questions or concerns, please contact Dennis Kaiser