With downtown Los Angeles seeing a vacancy rate that's three times higher than the rest of the city, landlords are ratcheting up the competition for tenants.
Fashion blogger Nina Hu and her personal trainer husband ended up going with a one-bedroom loft at G-12 Apartments, which opened this spring in the South Park district. Between six weeks of free rent and a year of free parking, they've saved more than $4,500. Move-in specials, though, have not enticed enough people to fill the new apartment building, which Hu said sits more than half empty.
"Everyone that I know loves downtown, but I still don’t see that many people rushing downtown to fill up all these spaces," Hu, 32, said.
Thanks to a wave of market-rate rental construction, supply has outpaced demand downtown since 2014. The vacancy rate now hovers around 12 percent — the highest recorded by real estate research firm CoStar Group since 2000, compared to a citywide vacancy rate of about 4 percent.
New rental construction has been concentrated downtown because zoning updates have made it easier to build taller and denser, and there is not the same level of neighborhood opposition seen in other parts of L.A. High-rises are going onto surface parking lots. Rundown buildings are being torn down and replaced with mixed-use developments that house coffee shops and pet care stores on the ground level.
The result has been thousands more luxury apartments than there are renters. Of the 21,000-plus market-rate rentals tallied in a recent report by the Downtown Center Business Improvement District, more than 2,000 are empty under the current vacancy rate.
CoStar senior market analyst Steve Basham said that in the last several years, landlords have been ramping up concessions to lure tenants. Of course, the savings are relative when the average rent for a one-bedroom runs around $2,500. Basham said the high rents are why apartments aren't filling up faster.
"The stuff that’s being built right now is really targeting the very top of the renter’s pool," Basham said. "The majority of the renters in L.A. are not going to be able to afford that."
Basham said vacancies could keep growing next year, while rents could slow — and even drop —as more than 4,000 new apartments come online.
But he said construction as falls off in 2019, supply will catch up with demand among affluent urbanites. He predicted that more of the people who work downtown will decide they want to live near their jobs. And, he said, downtown's proximity to sporting venues for the 2028 Olympics that L.A. is hosting will only generate more interest in the area.
All the market-rate apartments sitting unoccupied in the interim, however, irritate housing advocates such as Thelmy Perez, given California's shortage of affordably-priced homes.
Perez and her group, Los Angeles Community Action Network, spent part of Thursday protesting plans for a residential high-rise on 7th and Maple before the City Planning Commission. Eleven percent of the project's 452 units would be set aside as below-market rate; the rest would be luxury.
"We're continuing to see double-digit increases in homelessness," Perez said. "This is not the kind of project we need downtown, especially considering the vacancy rate is so high."
But developers and real estate agents are bullish on downtown's high-end residential market, and believe the double-digit vacancy rate is temporary.
Realtor Alexis Alegre of Smart LA Realty said that downtown is in the middle of a renaissance that will continue to draw new residents who want to walk to work, restaurants and shops.
She said in the last year, she and her partner completed 150 new leases in more than 50 buildings. Many of their clients sought help after finding the huge selection of apartments downtown overwhelming.
"It's doctors, accountants, musical artists, producers, people who work for L.A. County — it's just very eclectic," Alegre said. "I think what brings people together is the love of an urban lifestyle."