Page 94 - AAGLA-MAR 2022

Member Update
Average effective rent growth, measured as the effective rent for a new resident, grew by about 12% in 2021 to close the year at a little less than $2,500 per month. Two submarkets, Mid-Wilshire – Central Los Angeles and Long Beach stood out from the rest with annual appreciation of 24% and 20% respectively. On the other end of the spectrum, three areas saw average effective rent climb by less than 5% during the year: Beach Cities, Mid-Cities West, and San Fernando Valley.
Here too, the picture from a class perspective was starkly different than in 2020. Rent growth was negative in 2020 for the top three price tiers, led by a 5% loss for Class A. In 2021, Class A average effective rent rose by 15% while Class B gained 14% and Class C added 10% at the average. These increases obviously made up for 2020 losses, and then some. For Class D properties, an annual gain of just over 1% in 2020 was followed by an increase of nearly 4% in 2021. One the one hand, the broad-based nature of the growth is a positive indication of strong fundamentals for the market, on the other, affordability concerns will not be alleviated – particularly in the Class C segment.
Of course, the movement in lease concession availability played a major role in rent growth. A 60% annual decline in availability resulted in only 10% of conventional properties across the Los Angeles metro area offering a new lease
discount to close the year. This was the lowest rate of availability to end a year since 2018, and almost exactly equal to that from the end of 2017. However, there was not uniformity among the submarkets. While no area logged an increase in lease concession availability, the Greater Downtown and Santa Monica – Marina Del Rey regions remained elevated relative to the rest of the market – with about 30% and 25% of properties offering a discount respectively.
Key Takeaways
2021 will be a year that is referenced and discussed in the multifamily industry for years to come. Record demand fueled a jump in average occupancy, a full retreat of lease concessions, and rent growth unlikely to be matched any time soon. The Los Angeles metro area was certainly not a market left out of those developments. Apartment demand greater than in the three previous years combined fueled double-digit rent growth and prevented any submarket from seeing a further slide in average effective rent for the year.
Whether it is the continued impact of the
COVID-19 pandemic, construction difficulties, exacerbated affordability concerns and more, 2022 is sure to bring its own challenges. But many of the factors that fueled the historic performance of 2021 remain in place and although 2022 will almost certainly not post numbers as gaudy, there is little reason to expect anything other than a robust year for the multifamily industry.
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Jordan Brooks is a Senior Market Analyst at ALN Apartment Data. In addition to speaking at affiliates around the country, Jordan writes ALN’s monthly newsletter analyzing various aspects of industry performance and contributes monthly to multiple multifamily publications. He earned a master’s degree from the University of Texas at Dallas in Business Analytics. For more information visit the ALN Apartment Data website at www.alndata.com.
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