By THOR KAMBAN BIBERMAN, The Daily Transcript
Tuesday, April 12, 2011
Rents are projected to rise slightly in San Diego and Orange counties, and the Inland Empire counties of Riverside and San Bernardino for the next two years, according to a report.
Los Angeles County is expected to see a minor rent decline during the same period.
The 2011 University of Southern California Lusk Center Casden Multifamily Forecast reported San Diego County's rents are expected to increase 0.4 percent in 2011 and 0.8 percent in 2012, while vacancies are projected to remain flat through 2012.
San Diego County was the only one of the four Southern California markets that saw a decline in rents and only declined by 0.2 percent last year to about $1.53-per-square-foot, or $1,338 for an 875-square-foot unit.
MarketPointe Realty Advisors pegged the average rent in roughly that same range at $1,335 per month as of the end of last March -- still quite a high figure when compared with most of the rest of the country.
However, it is significantly lower than the $1,501 average rent for the Los Angeles metropolitan area and the $1,475 average for Orange County.
"Though there's evidence that rents have begun rising at the national level, the most positive news we have in Southern California is that rents have stopped falling after two years of negative growth," said forecast co-author Tracey Seslen, of the Lusk Center.
"Rents and vacancy rates will likely remain at their current levels for the next two years, signaling stabilization in the market and that the worst may be over," Seslen said.
The Casden forecast stated the La Jolla/University City markets are expected to see the largest rent increases at about 1.3 percent over the next two years.
The Chula Vista/Imperial Beach submarket is expected to see a similar increase in rents over the same period, but this may be tempered somewhat by the addition of 774 new units this year.
The area in and around San Diego's downtown core plus Coronado that Casden refers to as "Intown" is expected to be the weakest performer with a projected 2 percent decrease in rents this year, followed by a modest increase in rents in 2012.
The rent decrease in the Intown area is despite a projected vacancy plummet from 9.3 percent down to 5 percent over the next two years.
The county's vacancy ranges extended from Intown's 9.3 percent to just 2.4 percent in the La Jolla/University City submarket.
The Casden forecast reported the county's overall vacancy declined by 0.4 percent in 2010 to 4.6 percent.
MarketPointe, which limits its survey to complexes with 25 or more units, saw a 5.06 percent vacancy in March.
A 5 percent vacancy level is considered the industry standard for a balanced market.
After a couple of years of negative job growth, the Casden forecast said San Diego County only managed to add 5,200 jobs in 2010.
The figure is expected to range between 10,000 and 20,000 this year.
"While we are no longer hemorrhaging jobs, home affordability remains bleak in some areas, both of which bode well for the multifamily market," said co-author Richard Green, director of the USC Lusk Center and co-author of the Casden forecast.
"However, it is unlikely that rents will rise until the greater economic health of the region improves and some of the excess inventory in the housing market disappears," Green said.
Construction activity continues to be limited in the wake of the recession.
The Casden forecast said the 774 new apartment units in the Chula Vista/Imperial Beach market will represent a 2.9 percent increase in supply this year.
The 1,051 new apartment units slated for countywide completion represents a 0.4 percent increase in 2011.
The forecasters, with an eye towards the investment market, like that there is very little shadow inventory in San Diego and even with sharp home price decreases, it remains difficult for many would-be homeowners to qualify.
As for the other markets, the vacancy rate in Los Angeles County is projected to decline by less than 0.5 percent over the next two years.
L.A. checked in with a 5.9 percent vacancy rate along with that relatively expensive $1,501 average rental rate that is expected to decline by 3.2 percent over the next two years.
The Inland Empire still hasn't recovered from the recession.
That region lost 7,600 jobs in 2010, but 10,000 to 20,000 new jobs are still expected in 2011.
Rents in the Inland Empire are projected to remain flat through 2011 and rise 0.5 percent in 2012.
The region's average rent was $1,034 per month. Vacancy rates, which are averaging 6.1 percent are projected to remain flat for the next two years.
Orange County, which had a $1,475 average rent and a 5.1 percent vacancy at the time of the survey, is expected to see little change in rents or vacancies over the next two years.
Source: SanDiegoSource.com
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