By: Nicholas A. Dunlap, CPM
People are always asking me what I think about the market. And if you follow my blog, you will know that I think there are some great opportunities available in the market at present. You can acquire distressed office properties in primary markets such as Orange & Los Angeles counties for a fraction of what they sold for 4 years ago or you can look outside Southern California in areas with room for growth, like the Austin, Dallas or Las Vegas multifamily markets. By room for growth, I am talking population, employment and ultimately rent growth, which ties into my point on the other market so relevant to our business as property owners and operators: the rental market.
As for current trends, we have continued to see occupancy and rental rates increase. Existing and market rates have continued their uptick as consumers remain priced out of for-sale housing. Orange County has seen steady demand for B & C grade multifamily housing, whose rates have not been hit as hard as Class A product. Although market rental rates had gradually increased over the past 1.5 to 2 years, 2011 was the first year in the past 3.5 years that we raised rents on existing residents. The one bedroom apartment is again becoming favorable as younger renters and those who had previously doubled up with family members continue to move out on their own. Thus, as vacancy rates continue to decline, we should also see a correlation between less move-out or turnover and a decrease in maintenance expenses.
While 2011 saw modest yet very welcome increases of 2% to 5%, we are hopeful that 2012 will see a strong 3.5% to 5% increase in rental rates across the board. Since we have already started to play “catch up” on the time lost following the economic collapse and the recession of 2007-2009, but it will take strong job and wage growth for us to continue the progress necessary to restore certainty and confidence to our economy. Of course, in states like California, it will also take strong political leadership and guidance to restore some stability and confidence to a place that has done so much to shoe businesses away. Will we see the lost jobs return to California? Or will they be outsourced or relocated to Arizona, Nevada, Texas or…India?
Politics aside, the demand for apartments remains strong and looks to continue well on through 2013, especially in Southern California.