Southern California apartment rents and occupancy rates rank among the highest in the country, and economic gains should push these levels higher, according to a forecast released today by the University of Southern California Lusk Center for Real Estate.

About 97 percent of apartments in Los Angeles, Orange, Riverside and San Bernardino counties are rented and those occupancy rates should remain steady this year, according to the Casden Real Estate Economics Forecast.

Rent increases of 6 percent to 7 percent are forecast in Los Angeles, where the average monthly rent at the end of last year was $1,416. Orange County renters also can expect a rent hike of 6 percent to 7 percent beyond the average monthly rent of $1,390. Inland Empire rents, which averaged $1,012 per month at the end of 2005, should rise about 5 percent this year.

“The recent run-up in home prices makes apartment living more desirable,” said Delores Conway, director of the Casden forecast, in a statement. “And the tight supply of land coupled with more condo conversions means fewer available units. That translates into higher rents and occupancy rates for the next couple of years.” She also stated that apartment demand will benefit from the region’s increased growth in trade along with an infusion of higher-paying jobs associated with business and professional services.

The forecast analyzes apartment transactions, new building permits, leasing activity and employment data using information from MP/F YieldStar, Property & Portfolio Research and other sources.

In Los Angeles County, demand for apartments is expected to be bolstered by the addition of 45,000 to 60,000 new jobs. Los Angeles County leads the nation in multifamily development, with 10,900 new apartments under construction at the end of 2005. Constrained by available land, these projects average 57 units apiece, according to the report. By comparison, apartment projects in Orange County average 270 units. With the urban lifestyle appealing to more households, downtown Los Angeles accounted for one-third of all apartments completed in the county in 2005. Occupancy rates downtown – now at 98.2 percent – are the highest in the county and will continue to be tight, the Lusk Center reported. In West Los Angeles, rents are rising in step with jobs recovery.

“The Hollywood submarket’s makeover in Hancock Park, Los Feliz, Silver Lake and Park La Brea should keep apartment demand strong this year. The South Bay submarket is on a steady path to recovery, boosted by federal spending and accelerated growth in global trade. The Antelope Valley continues to be Los Angeles’ most affordable submarket, with average monthly rents of $916 per month last year,” according to the announcement today.

High home prices and few apartment completions in 2005 is expected to maintain a strong apartment market in Orange County, with demand in the most affordable (Anaheim) and most expensive (Newport Beach) communities. “Irvine remains a dominant submarket with the greatest number of new apartments completed,” according to the announcement, and six new communities with a total of 1,400 apartments are scheduled to open this year.

The average rental rate in Newport Beach is $1,892 per month, or about 33 percent higher than the rest of the nation. There has been no new apartment construction in Newport Beach since 2002. New construction and urban revitalization is under way in Anaheim, with two high-end projects bringing about 500 new units to market this year, according to the announcement. In Buena Park, no new products are expected this year and “occupancy remains extremely tight so further rent increases are expected.”

In the Inland Empire, cheap land has fueled the growth of affordable apartments for the rising labor force in the area, the Lusk Center reported. “The Inland Empire’s robust multifamily market will see steady, but moderate rent increases thanks to almost 6,000 new units opening in 2006. The trade-based submarkets near Ontario Airport continue to be strong, helping the entire region hold on to the title of California’s fastest-growing urban area over the next 10 years.”

The supply of apartments may exceed demand so that rent increases could become more tempered this year, with the rate of growth at approximately 5 percent, according to the announcement. “The Foothill Area, close to job centers in Los Angeles and Orange County, should continue to have the most expensive rents which averaged $1,172 per month at the end of 2005. This area is centered around Ontario Airport and includes Rancho Cucamonga. Southwest Riverside County, including Temecula, Murrieta and Wildomar, is the market leader in new construction with 3,000 units under way.”

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