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Rents to Rise in Los Angeles County

The USC Lusk Center for Real Estate predicts average rents will increase 7.9 percent in 2012, with total growth of 9.6 percent by the end of 2013.

Multi-family rentals did well in Southern California in 2011, and the market should grow over the next two years, according to an annual survey released Wednesday by USC's Lusk Center for Real Estate.

"A sharp drop in new construction, the dwindling supply of shadow-market units and improvements in the macroeconomy have strengthened fundamentals on both the supply and demand side,'' said Tracey Seslen, the lead author of the study. "This is boosting asking rents, reducing or eliminating concessions and filling units. However, the rate of increase will begin to level off a bit by 2013."

The annual forecast, which Los Angeles, Orange and San Diego counties and the Inland Empire showed across-the-board improvements in rents and vacancy rates in 2011.  

Seslen said rent growth in 39 of the region's 40 sub-markets was a sharp contrast from two years ago when only three markets saw increased rents, as well as last year when 26 markets showed flat or growing rents.

Los Angeles County, which had a 6.2 percent increase in average rents and 22,340 net move-ins, was the strongest performer.  

While all four markets again saw positive net absorption in 2011, only Los Angeles and San Diego counties saw an increased rate of absorption.   

Orange County saw the largest increase in same-store rents, 4.9 percent, but it also had the smallest increase in average rents, 3.2 percent.

"All four metro markets have returned to vacancy rates that are very close to their natural levels, which is the level at which inflation-adjusted rents remain constant," Seslen said.    

In Los Angeles County, the Lusk Center predicted average rents will increase 7.9 percent to $2 per square foot in 2012, with total growth of 9.6 percent to $2.04 per square foot by the end of 2013.   

Vacancies are expected to rise slightly in 2012 with increases continuing in 2013 as rent growth slows.   

Renters have been moving out of "shadow-market" inventory and back into traditional multifamily properties, according to the study. That trend is expected to continue through 2012.   

Some of the most credit-worthy renters could be lost if home prices continue to fall, because they may buy homes, the study's authors noted.

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