Sheltering in place for weeks on end gives you plenty of time to consider what you like and dislike about your apartment. For example, I love my studio’s walkable location but loathe its lack of natural light, which has sent multiple houseplants to the compost bin.
Fortunately for Angelenos who are at their wits’ end when it comes to their current living situation, asking rents are down for the first time in nearly a decade. That’s according to a new report from commercial real estate database, CoStar, which indicates a decline of about two cents per square foot over the past nine weeks.
LA rents peaked during the first week of February at $2.51 per square foot — an all-time high for the city. By the time the second quarter commenced on April 1st, asking rents had dipped to $2.49 per square foot. The sharpest declines have been measured in Pasadena (-2.54 percent), South Bay (-2.01 percent) and Greater Culver City (-1.21 percent).
“On an annualized basis, the recent declines would equate to rent losses of roughly 5% year-over-year,” wrote CoStar analyst Stephen Basham. “And it marks the first time that apartment rents have declined significantly in the market since 2010, when the region was still in the throes of the Great Recession.”
The new construction rental market has been particularly hard hit by the COVID-19 pandemic. The vast majority of these developments are luxury communities with premium amenities, designer finishes and correspondingly high rental prices.
Asking rents for new construction units declined by about 0.75 percent between March 10th and March 30th, representing a 12 percent loss on an annualized basis. This could cause some developers to delay luxury rental projects that were scheduled to deliver in 2020. Even with virtual tours, online appointments and leasing incentives, filling new units amid a statewide stay-at-home order can pose a real challenge for property managers.
Downtown Los Angeles stands to suffer the most serious blow, according to the report. There are more than 4,000 units currently under construction in the core, and asking rents have already sunk by 4 percent since the beginning of the year due to an influx of new luxury rental units.
However, developers and building owners may experience a faster recovery from the economic fallout because of California’s severe housing shortage. “The overall amount of new residential development is still very limited outside of Downtown and a few other areas,” continued Basham. “Minimal pressure from new supply has helped keep the market relatively stable during previous periods of economic uncertainty.”