Before the coronavirus pandemic, Los Angeles’ multifamily market was humming and 2020 rents were forecast to rise. The year hasn't played out as expected.

Now, as they watch vacancy rates rise and average rents fall in Los Angeles, many property owners, developers and market-watchers are also keeping a close eye on the value of LA’s multifamily properties.

The apartment buildings and portfolios that are selling now don’t seem to be seeing dramatic drops in their worth. Green Street Senior Analyst John Pawlowski, who focuses on the residential market, said he had seen the sale of a large, California apartment portfolio, mostly properties in the Bay Area and Southern California, that was valued only a couple of percentage points below where it would have been marketed prior to the pandemic.

“We do think there are more discounts coming, but all else equal, apartment values are holding up well from our lens,” Pawlowski said.

Jamison Realty CEO Jaime Lee agreed. Lee said Jamison, whose holdings are mainly in Mid-City, Koreatown and Downtown, has sold four properties during the pandemic so far. The properties that sold were all value-add properties with 75 units or fewer. For smaller buildings like these, Lee said, “valuations have continued to hold.”

Lee, Pawlowski and CBRE Director George Koiso spoke Thursday at an event organized by the USC Lusk Center for Real Estate. The event took the place of the forecast that the center usually releases each fall, which projects new construction, vacancy and rents for the coming year. That forecast has been pushed to the spring.

“We are not doing that right now because I don’t think we can forecast in the absence of knowing what’s going to happen with the pandemic,” Lusk Center Director Richard Green said.

Large apartment buildings — especially urban assets that are in the lease-up period and are offering rent concessions or are in areas where a lot of new units are coming onto the market — are difficult to sell because it is difficult to figure how much they are worth right now, said Koiso, who leads CBRE Los Angeles' multi-housing valuation practice.

But the situation is changing month to month, Koiso said. Over the last 60 days, brokers in his office have reported that they have more listings — sometimes twice as many — than they would typically have at this time of year.

Due to the pandemic, the fundamentals of apartments, including vacancy and rent collections, are all going in the wrong direction, Koiso said. By the last week of September, for example, 93.4% of LA tenants had paid their rent compared to the 97.8% that had done so by the same time in 2019, or a difference of about 4.4%, real estate data tracker RealPage found.

Koiso said one reason that valuations are not similarly degrading has to do with low interest rates.

“Sellers aren’t willing to sell because they have a lot of options for financing,” Koiso said.

“There’s so much dry powder on the sidelines,” Lee said. “People don’t have to transact if they don’t absolutely need to.”

Adding to the lack of clarity on what some multifamily developments are worth is the apartment REIT market, Pawlowski said.

Pawloski said Green Street thinks that apartment REITs are cheap right now relative to other commercial real estate alternatives.

“We believe the REIT market has overreacted a little bit,” he said.

The S&P 500 residential REIT index is down 19.82% year-over-year as of Monday, while the S&P 500 overall is up over 10% over the same period.

Because apartment REIT values can sometimes be a leading indicator of where private market apartment values are headed, the drop is messing with the private market, Pawlowski said.

“It’s just going to take time to play out who’s more right: the public market or the private market,” Pawloski said.