LOS ANGELES (CBSLA.com) — A new report this week forecasts more affordable rent for luxury apartments across the country, but it’s a trend that may not make its way to Southern California.
Because of a surplus in luxury apartments coming on the market in 2017, the Wall Street Journal says landlords will likely be forced to slashed rents and offer more perks, such as free parking and waived security deposits.
Several developments touting luxury apartments – which can include everything from high-end amenities such as designer bathroom fixtures and finishes, concierge services and on-site hair salons — are currently under construction in Southern California. But such developments are a long-term investment, says Michael Cusumano of the Cusumano Real Estate Group, the developer of Talaria at Burbank, which is scheduled to open in 2018. But if there is oversupply, then such units will become more affordable to more renters, he said.
“We are in this market for the long term; minor fluctuations in the supply and demand equation in specific segments of the market don’t overly concern us, especially when the overall rental market supply/demand equation is subject to such significant undersupply and overdemand on an overall basis,” Cusumano said in an email.
The Los Angeles area is unique because demand for housing remains high at all price points, according to Ellen Riotto, interim executive director of the South Park Business Improvement District, which is working with the developer of the CIRCA Project in downtown Los Angeles. The development will include luxury rental apartments and retail space.
“People tend to underestimate the housing shortage we are experiencing, even with current development,” Riotto said. “Even with all that in the pipeline, we’re nowhere near bridging the gap between existing housing and need.”
The housing bust helped lead to the increased focus on building rental units, and high-end apartments give builders the highest return on their investments, but the current market demand is for affordable, for-sale housing units, Redfin’s Chief Economist Nela Richardson said in an email.
“This market is ripe for condo conversion. If these developers were to convert their high-end apartments into condos for sale we could kill two birds with one stone by transforming an over-supply of rental units into more supply for homebuyers,” Richardson said.