Considering Los Angeles? Here’s what you need to know:
- Population: 10 million
- Occupancy: 96.7%
- Median Age: 32
- Median Household Income: $49,388
- Median Rent: $1,206
- Unemployment: 5%
Notable: Where else but in Los Angeles would you find the Museum of TV and Radio? The eventual site of the megapolis was discovered in 1542 by Spanish explorer Juan Rodriguez Cabrillo, who called the marshy area the Bay of Smokes. Baseball?s storied Dodgers and basketball?s Lakers call L.A. home these days, as do more than 30 colleges and universities.
Going Up
Lower vacancy rates and higher rents fuel REITs.
Though apartment owners may not need any further proof of the burgeoning market this year, the Bloomberg apartment REIT index jumped up 28 percent. This was twice the gain of the overall Bloomberg REIT index, which includes other real estate sectors. The survey pointed specifically to Equity Residential in Chicago, AvalonBay in Alexandria, Va., and Archstone-Smith in Littleton, Colo.
These results don’t surprise many industry observers. “Vacancy rates nationally have dropped to a more normal level [around 5 percent], while rents have finally begun to rise at a rate slightly higher than that of overall inflation,” says Mark Obrinsky, chief economist and vice president of research for the National Multi Housing Council in Washington, D.C. “By contrast, for four and a half years, rents either declined or rose at a rate below that of inflation.”
Ric Campo, chairman of the board and CEO of Camden Property Trust, a REIT based in Houston, sees signs of positive change in other indexes. “The business has changed very positively for multifamily,” he says. “If you look at multifamily, compared to the NAREIT [National Association of Real Estate Investment Trusts] index, the NAREIT is up 8, 9, or 10 percent, but apartments are up 20 percent. It’s primarily because the operating fundamentals are good. The cash flows are rising.”
What could derail this growth trend? A recession, which some economists are predicting, would definitely hurt things. While Obrinsky doesn’t predict one, he does say it’s possible. “If we do see a recession, that would certainly not be good for apartment firms,” he says. “We’d probably see the same kind of ‘doubling up’ we saw in 2001 and 2002.”
–Les Shaver