Negative impacts from the coronavirus pandemic are still playing out across Downtown LA’s commercial real estate landscape, but one sector is starting to see a noticeable improvement.
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Over the last year, average effective apartment rents in DTLA grew 16% to a new record of $2,701, according to CoStar data as first reported by Bloomberg.
Vacancy is around 6%, according to a January report from CBRE, which uses CoStar data. This time last year, the vacancy rate for the neighborhood was 14%.
“I personally am impressed with how fast Downtown is recovering from the pandemic,” said CBRE Executive Vice President Laurie Lustig-Bower, who specializes in selling apartment buildings and land for residential apartment and condo projects.
During the pandemic, landlord concessions pushed effective rents down for the neighborhood, but that's changing, Lustig-Bower said.
Starting in the summer of 2021 and continuing to the present, landlords have been scaling back or altogether removing concessions as a result of increasing interest, helping the effective rents to rebound.
"We're catching up to what we lost in the pandemic," Lustig-Bower said.
Downtown LA still counts a higher vacancy rate than Greater LA, but much of that is due to the volume of new units coming online, which far exceeds other neighborhoods, CBRE notes.
The decrease in vacancy was, at least partially, due to the flow of new inventory slowing down, Bloomberg reported, citing CoStar.
Over the next two years, about 3,700 units are expected to come online in Downtown. Almost all of the new construction in the neighborhood is aimed at renters who are able to pay top-of-the-market rates, meaning Downtown will need to sustain a steady stream of wealthy renters “from other parts of the metro and country” to fill them, CBRE’s report said.
Downtown's office and retail sectors have been especially impacted by the pandemic. With many employees still working from home, retail businesses that once relied on them have lost out on sales. The return of residential tenants to Downtown could help prop up those harder-hit sectors, Lustig-Bower said.
"I think the the retail tenants are going to see more customers coming into their store or their restaurant because there's more people living in Downtown LA," Lustig-Bower said.
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