A Message from Jesse Hernandez, President of IRES Commercial
As Californians, we’ve faced significant discussions about the future of housing in our state, particularly around rent control. This past November marked the third time since 2018 that voters rejected a statewide rent control proposition. While these decisions shape the broader market, it’s important to keep a close eye on how apartment rent growth trends impact the various regions of California.
Let’s break down some key insights from the past year across major markets and their implications for investors and property owners:
Los Angeles
Rent growth in Los Angeles saw its peak in early 2022 at 6.8% after a historic surge in renter demand. However, the story since then has been one of moderation. Annual rent growth now hovers below 1%, with the third quarter showing a mere 0.6% increase. Factors like economic challenges in the entertainment and tech sectors, along with continued outmigration, are keeping landlords from raising rents significantly.
Orange County
Orange County continues to stand out as the most expensive multifamily market in Southern California. Following a sharp 16% increase in rents during 2021, the region saw a nation-leading 4% rent growth in 2023. Despite this, growth is expected to slow to just 1% in 2024 as the market prioritizes maintaining occupancy over aggressive rent increases. With affordability slightly improving and vacancies remaining low, 2025 could present an opportunity for further rent growth.
Inland Empire
The Inland Empire has been a leader in rent growth since the pandemic, as affordability drove renters inland from pricier coastal areas. Rents are now 30% higher than in early 2020, but that growth has slowed as affordability challenges and higher vacancy rates have emerged. The region is projected to see modest rent growth of about 1% in 2024 as new apartment supply enters the market.
San Diego
San Diego’s rental market has cooled significantly after peaking at over 12% rent growth in 2022. By the third quarter of 2023, growth had slowed to just 0.2% annually, with rents now averaging close to $2,500 per month. As the sixth most expensive rental market nationwide, San Diego faces a combination of leaner demand and weaker household formation, contributing to this deceleration.
What This Means for You
Understanding these regional trends is critical for navigating the commercial real estate landscape in California. Whether you’re an investor looking to expand your portfolio or a property owner seeking to optimize returns, a strategic approach tailored to each market’s unique dynamics is essential.
At IRES Commercial, we pride ourselves on helping our clients identify opportunities in every market cycle. With our deep industry expertise and commitment to your success, we’re here to guide you through the complexities of the commercial real estate market.
Let’s Build Your Commercial Success Together
If you’re ready to capitalize on opportunities in California’s evolving apartment and commercial real estate markets, contact us today. Let’s discuss how IRES Commercial can help you achieve your investment and growth goals.