Some luxurious apartment buildings in the part of Los Angeles known to locals as “DTLA” might feel more ghost town than downtown right now.
The current vacancy rate in Downtown Los Angeles is 12 percent — three times higher than the 4 percent recorded for every other area in Los Angeles, and a higher rate than DTLA’s seen since 2000.
While low inventory and high levels of rental construction activity have fueled rental markets in other parts of the city, renters simply aren’t shelling out (or can’t afford) to live in DTLA’s slew of new luxury high rises.
As luxury apartments continue popping up, the price ceiling steadily rises. According to rental site Zumper, the median one-bedroom rent in DTLA stands at $2,550. Rental prices have already surpassed those of Bel-Air.
Market-rate rental construction has caused supply to far outpace demand; of the 21,000-plus market-rate rentals in DTLA, about 2,000 remain vacant, KPCC local news reported.
In an effort to fill those empty homes, landlords have been cutting deals and throwing in perks like free parking. One DTLA couple, reported KPCC, saved over $4,500 because of the landlord’s move-in special: six weeks of free rent and a year of free parking. Despite the deep discounts, there still aren’t enough residents to fill even half of the building.
So, why aren’t those incentives causing a dent? “There are rental discounts and incentives given by landlords, but this has always been the case with new leasing buildings,” said Letty Vermeulen, broker-owner of Aspire Los Angeles, in an emailed statement to Inman. “That does not take away that the supply has definitely increased with new developers coming to DTLA in the last decade.
“The amount of rental units available should help stabilize some of the higher rental prices, but new developers are also bringing different kinds of buildings to market, like Level Furnished Living, which offers fully furnished units that are available for nightly and short term month-to-month leasing.”
Luxury amenities may help reel in the tenants eventually: “Developers are providing high-end amenities in many of these new buildings, and are going to continue to appeal to renters looking for walkability to work and restaurants, and looking to enjoy the urban lifestyle,” she added.
CoStar Group’s Steve Basham said that these pricey new apartments are targeted toward the estimated 1.5 to 2 million Angelenos who are able to afford them. And renters are expected to come around eventually once population growth becomes an issue in other areas, or when they get tired of dealing with traffic. “You get 500,000 people who commute into DTLA and leave, so the potential renters are there,” Basham said. “It’s just convincing them that it is a good place to live and stay down here.”
All things considered, Basham says investments in DTLA will be profitable if developers are willing to stick with it; don’t count on any quick rewards right now, but expect a good return in 10 to 20 years, he said.