The massive influx of new high-end condos going up in downtown Los Angeles has been perhaps THE biggest story in Los Angeles real estate. Billions are being spent on DTLA residential units. New high rises are seemingly popping up everywhere.
But is it too much? According to a recent report by The Real Deal, concern is growing on whether DTLA is being overbuilt. The real estate new site reported there are currently 3,000 luxury apartment units under construction, with another 4,000 units set to break ground next year.
The early signals aren’t good. At 11 percent, DTLA has the highest vacancy rate in Los Angeles County. This despite the fact landlords are increasing their concessions to attract tenants. This development has not been lost on investors.
From The Real Deal:
“The sheer volume of multifamily construction in DTLA—paired with the growing vacancy rate—has made lenders more cautious about offering loans to developers. Even for those who nab construction loans, a lower loan-to-value ratio has left developers with financing gaps, said an analyst who did not with to be named.”
The Real Deal reported rent growth in DTLA has been almost non-existent the past year, despite rents rising by an average of 3.5 percent in greater Los Angeles during that time. In fact, of 36 L.A. submarkets, DTLA ranked second-last in rent growth.
The Real Deal article really offers an eye-opening account of what’s happening in DTLA and it’s well worth the full read. You can find it here.