Empty apartments in Downtown LA are filling up, according to a new report from real estate analyst CoStar. The neighborhood’s vacancy rate, which eclipsed 12 percent last year, has fallen to 6.2 percent amid a brief lull in Downtown’s frenetic pace of development.
As CoStar points out, nearly 8,000 apartments opened to Downtown LA renters between 2014 and 2016. All those units helped drive the neighborhood’s vacancy rate to a 17-year high, with building owners offering perks like discounted parking and a month of free rent in order to attract tenants.
But in the second half of 2017, only 640 new apartments came online in the neighborhood; so far, none have arrived in 2018.
With the number of newly built units shrinking, far fewer apartments are sitting empty—though Downtown’s vacancy rate is still high compared to the rest of the city.
Across all of Los Angeles, CoStar finds the vacancy rate to be 3.7 percent. In some neighborhoods, including much of the San Fernando Valley, the rate is under 3 percent.
Vacancy rates, which measure the percentage of rental units that aren’t being lived in at a particular time, are an important indicator of whether an area has enough housing to satisfy renter demand.
Some activists suspicious of new development argue that high vacancy rates like those recorded in Downtown last year are evidence that new luxury apartments are being offered at unaffordable rents and won’t bring down costs for renters, as advocates of new housing suggest.
According to CoStar, the cost of a one-bedroom in Downtown LA is close to $2,500, but the company’s report suggests that swings in the vacancy rate have more to do with construction of new projects than the prices renters are faced with when signing a lease.
Those new units are likely “pulling in affluent renters from other parts of the metro [area],” writes CoStar analyst Stephen Basham.
He points out that rent has actually increased nearly 3 percent per year for units constructed between 2014 and 2016 in Downtown LA, and that building owners have scaled back perks for new tenants. (though, when we did a quick survey of recent apartment projects, we found generous discount offers at South Park’s G12 and Olympic & Olive complexes).
Downtown’s vacancy rate might not stay down for long. With development still booming in South Park and the Arts District, almost 7,000 new apartments should open to renters by the end of 2020. How high the vacancy figure gets will depend on how fast people start moving in.