Downtown Los Angeles Apartment Rents — how far have they fallen?

Suburbanization has been a trending topic — the exodus of population from the urban core out to suburban areas.

Personally, I’m considering moving to DTLA so I wanted to figure out my rental options.

Conclusion: It’s a great time to be a renter in urban markets.

Topic Preview

• I personally called 20+ Class A Multifamily properties in DTLA to create the chart below.
• Gross rents are down 20% — 30% from pre-Covid rent levels.
• Since many buildings are offering various promotions, effective rents are down 27% — 32% from pre-Covid levels.
• I suspect that these findings mirror trends occurring in most major US cities.

Methodology

In March 2021, I spent a weekend calling 20+ Class A multifamily buildings in DTLA to research rental rates for studio and 1-bedroom apartments. The above chart represents the six most aggressive luxury buildings.

*Please note that “Averages” in the chart are based on data from all 20+ buildings

These conversations amazed me. Apartments are competing vigorously for a limited amount of demand and offering various promotions to get units leased.

Other than rental price, these are key items I assessed:

• Months of Free Rent — “if I sign a lease for 12 months, how many months do I NOT have to pay you rent?”
• Look and Lease Promo — “if I come take a look at the property in-person and I sign a lease within 72 hours, how much of a one-time promotional bonus will you give me?”
• Referral Bonus — “if I know someone living in your building, do you pay them and me a one-time referral bonus if I sign a lease?”

Research Findings

• The average Class A studio charges a gross monthly rent of $1,854
• The average Class A studio charges an effective monthly rent of $1,768
• Most properties are offering 1 or 2 months of free rent
• Some properties are offering a “look and lease” promo of typically $750 — $1000
• Most properties are offering a “referral bonus” of typically $500 for both referrer and referee

Let’s Put it Into Perspective

According to a CBRE Research Report titled “Los Angeles Multifamily MarketView Figures Q4 2019” the average rent in DTLA was $2,611 per unit (see page 13). My research showed that the average Class A multifamily gross rent is $1,854 for studios and $2,104 for 1-bedrooms.

These gross figures represent a rental discount of ~30% and ~20% respectively, from pre-Covid rent levels.

When you take into account all the promotions and assume that there were no promotions in Q4 2019 (since market vacancy was only 5.5% per CBRE Report), my research showed that the average Class A multifamily effective rent is $1,768 for studios and $1,901 for 1-bedrooms.

These effective figures represent a rental discount of ~32% and ~27% respectively, from pre-Covid rent levels.

Disclaimer

Almost all Class A multifamily properties use sophisticated software with access to real-time data. The software uses this data to determine rental rates. In almost all my conversations with leasing agents, I was told that rates change daily based on supply/demand data that is received by their software.

I would recommend acting quickly if you are a renter. With summer approaching and more people vaccinated, I expect rental rates to rise from here.

I would also suspect that my findings above mirror trends occurring in most major US cities.

Good luck out there my friends.

I’m happy to engage with you in the comments so that everyone can learn. If you prefer to share privately, feel free to email me at huber@stacksource.com

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