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NorthMarq’s Shafer: SoCal Apartment Fundamentals Create Opportunities

By Shane Shafer

Southern California continues to be a market that is highly sought after. The first half of the year saw fewer sales than in recent years. This has created an even larger increase in demand from buyer and capital to buy, as investors see Southern California as a market with great fundamentals that continues to improve each quarter. We have seen that those that have a presence in So Cal want to expand their portfolios, others that do not have a presence are aggressively bidding on properties to build scale and have a presence in one of the most sought-after markets in the county.

Investors are attracted to the stability, quality assets and consistent returns they find throughout Southern California. People believe that the region is poised to withstand a correction that could possibly occur down the road better than some other areas of the country, and they also like the renter demand drivers. Job growth remains strong through the region, and people who are attracted to the Southern California quality of life continue to support a robust renter market.

Recent NorthMarq research shows consistently high occupancy levels and rising rents, both of which support continued growth in net operating incomes. Vacancy rates are hovering at 4% in Orange County; 3.6% in Greater Los Angeles and 3.3% in the Inland Empire. Los Angeles, in particular, saw annual rent growth surge to 6.1% in the first half of the year.

Investors looking to buy in Southern California understand that assets come with a pricing premium, due to the highly competitive nature of the market. Cap rates are averaging 4% in Orange County, 4.5% in Los Angeles and the low 5% in the Inland Empire. The low cap rates are a testament to just how well the market is performing, and the further drop in interest rates is likely to put even more downward pressure on cap rates.

The current climate that includes low interest rates, strong fundamentals and a competitive buyer pool are all signs that suggest the second half of the year is shaping up to be a very active investment marketplace.

There continue to be good opportunities for both buyers and sellers. Sellers are enjoying the competitive bid environment. Every assignment that NorthMarq is working on these days is generating multiple bidders.

Buyers like the continued strength they see in fundamentals, which is supporting greater confidence that the market is not at the peak for rents, and there is still opportunity ahead to increase rents and net operating income.

*Pictured 901 E. First St. Santa Ana

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About Dennis Kaiser

Dennis Kaiser is Vice President of Content and Public Relations for Connect Commercial Real Estate. Dennis is a communications leader with more than 30 years of experience including as a journalist and in corporate and agency marketing communications roles. He is responsible for Connect’s client content operations and is involved in a range of initiatives ranging from content strategy, message development, copywriting, media relations, social media and content marketing services. In his most recent corporate communications roles, he led a regional public relations effort across Southern California for CBRE, played a key marketing role on JLL’s national retail team, and was responsible for directing the global public relations effort at ValleyCrest, the nation’s largest commercial landscape services company. In addition to his vast commercial real estate experience, Dennis has worked on communications and launch strategies for a number of residential projects such as Disney’s Celebration in Florida, Ritter Ranch in Palmdale California (7,200 homes, 22,000 acres), WaterColor in Florida and PremierGarage in Phoenix. Dennis’s agency background included firms such as Idea Hall and Macy + Associates. He has earned an outstanding reputation with organization leaders as a trusted advisor, strategic program implementer, consensus builder and exceptional collaborator. Dennis has developed and managed national communications programs for Fortune 500 companies to start-ups, both public and private. He’s successfully worked with journalists across the globe representing clients involved in major-breaking news stories, product launches, media tours, and company news announcements. Dennis has been involved in a host of charitable and community organizations including the American Cancer Society, Easter Seals, BoyScouts, Chrysalis Foundation, Freedom For Life, HOLA, L.A.’s BEST, Reach Out and Read, Super Bowl Host Committee, and Thunderbirds Charities.

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