Those cranes that have become a fixture of the downtown skyline aren’t going away anytime soon.
The area has delivered more than 50% of L.A.’s new rental units since 2018, and that pace is expected to continue in 2020.
At the same time, average rents in the area have increased a mere 1% compared with an 8% increase citywide, according to the Downtown Center Business Improvement District.
“We’re delivering a record number of units, but over time, downtown is able to absorb them,” said Nick Griffin, executive director of the DCBID.
Projects that have been on the market for a year are already seeing occupancy rates of 90% and higher, he added.
“The market remains strong downtown,” said Laurie Lustig-Bower, an executive vice president at CBRE Group Inc. “We would expect that even with the buildings that they are forecasting to build, that are coming on, that the market would absorb them.”
The third quarter saw fewer units delivered than in previous quarters, which Griffin said helped with occupancy rates.
During the third quarter, there were 5,744 residential units under construction and an additional 33,315 units proposed, according to DCBID data. Griffin said roughly 1,200 units would open by the end of the year.
Projects under construction now include Park Fifth, a property with nearly 350 units and retail space being developed by MacFarlane Partners; 1133 S. Hope St., a property with roughly 200 units and retail being developed by Z&L Properties Inc.; The Grand, a massive mixed-use project being developed by Related Cos.; and Oceanwide Plaza, a $1 billion project being developed at 1101 S. Flower St.
The high number of units coming online, Griffin said, helps with affordability.
“Across the city and the region, rents continue to rise because of the shortfall of supply,” he said. “Downtown L.A. is a perfect case study of what happens when you deliver more supply.”
Brokers expect the units coming online to be filled quickly.
“We’re only running at a six-week vacancy period,” said Kitty Wallace, an executive vice president at Colliers International Group Inc.
Lustig-Bower said there is a severe shortage of units compared to the workforce in downtown, adding that the large number of units in the works would likely be absorbed.
The number of condo sales downtown tells a slightly different story.
In the third quarter, 79 units sold for an average price of $690 per square foot, compared with 99 units for $723 per square foot the same time the previous year, according to DCBID data.
For reprint and licensing requests for this article, CLICK HERE.
Stories You May Also Be Interested In
- Work Wraps on $1B Metropolis Development
- New Home Base
- Developers Turn Condos Into Rental Property
- Market Known for Rental Properties Moves into Condo Projects
- Residential Developer Has Lot to Work With in L.A.
- Looking Up
- Strong Second Quarter for Downtown Market
- Golden Triangle Parcel Could Land Record Price