Waves of new fancy apartments in Downtown LA have helped bring the neighborhood’s vacancy rate to its highest level in nearly two decades. It’s now 12 percent—the highest recorded by real estate data firm CoStar since 2000, KPPC reported today.
With so many available units, building owners are offering lavish perks, from six months of free rent to one year of free parking to try to lure tenants. The median price of a one-bedroom in DTLA is about $2,500 per month, according to rental website Zumper.
“The stuff that’s being built right now is really targeting the very top of the renter’s pool," CoStar senior market analyst Steve Basham told KPCC. "The majority of the renters in L.A. are not going to be able to afford that."
These freebies indicate to some that luxury rentals aren’t the best use of Downtown’s space.
"This is not the kind of project we need Downtown, especially considering the vacancy rate is so high," Thelmy Perez of Los Angeles Community Action Network, a group that has spoken out most recently against a luxury apartment building at Seventh Street and Maple.
These “concessions” essentially equate to lowered rent if considered in aggregate, Paul Habibi, a real estate professor at UCLA’s Ziman Center For Real Estate and an apartment building owner, tells Curbed.
Why offer them instead of a lower monthly rate?
Habibi says high “contract rents” represent a high earning potential for a building if a owner decides to sell. Of course, when the lease period is up, the days of free rent are up, too.
Meanwhile, however, in the rest of the city, the vacancy rate is much lower at 4 percent, reports KPCC.
A low vacancy rate indicates that available apartments are in short supply, and when vacancy rates are low, rents tend to be high. Policy experts say that a vacancy rate below 5 percent signifies an area needs more rental units.