1970 to 2017 Apartment Completions

Marcus & Millichap predicts in their 4th Quarter Apartment Report for Los Angeles that 18,000 units will be completed in the next 12 months, while 2017 completions will be closer to 12,000 units. Although more units have been completed in the last 36 months than in any other 3 year period since the 1980s–apartment completion are still significantly below the 1980s. An 18,000 unit year is a horse of a different color. This increase would begin to rival the 1980s when supply did exceed demand. In any case. M & M forecasts vacancies rising from 3.6% to 4.1% in 2017. Despite the muted supply–Marcus and Millichap sees absorption in 2017 slowing from previous years. Perhaps, rents, which continue to increase, are now outstripping incomes–even at the higher income levels. Over half of the deliveries are in downtown Los Angeles. M & M forecasts downtown vacancies increasing from under 4% to 5.4% at the end of the year. Developers are offering incentives to rent their units. Although this absorption problem will put pressure on effective rents and make Downtown landlords more vulnerable to a recession–the new apartments will continue to cement Downtown as the upcoming new Los Angeles burb for upper income residents.