Even with home values falling in much of Orange County, the area remains a hard place to buy a home because of tougher lending requirements, overall economic woes and still historically high prices.
But these conditions aren’t translating into boom times for local apartment owners, market watchers say.
Big year-over-year rental increases that were the norm earlier this decade can’t be counted on, despite more people opting to or being forced to rent instead of buying a home.
Right now, “pricing is tough. Today’s renter is much more price-conscious and is in tune with concessions,” said Thomas Shelton, the new president of Western National Property Management, the multifamily management arm of Irvine’s Western National Group.
Western National,OC’s second-largest owner of apartments,is projecting that rents here will largely remain flat for the next year, with the potential for price hikes capped at about 3.5%.
That’s largely on par with what was seen in the past year. The average rent in OC now stands at $1,531 per month, about 4% higher than a year ago, according to Marcus & Millichap Real Estate Investment Services Inc.
Until this year, OC had been seeing annual increases from 6% to 8% for most of the past decade.
For newer, high-end apartment complexes, the average monthly rent is closer to $1,851, a 4.4% increase from a year ago, Marcus & Millichap reports.
Shelton,whose company’s buildings typically are more affordable options in high-priced locations,says the high-end segment of the market is likely to see a bigger decline in rents than the market at large during the next year.
Rather than expect higher rents to drive profits, most landlords will have to focus on improving operations, such as cutting energy expenses and insurance premiums, to make money, Shelton said.
But Shelton warns that profits won’t come easy as apartment owners are having to spend more time and money policing existing tenants who don’t pay their rent on time.
Vacancy Growing
Overall, OC’s apartment market remains tight, although vacancy levels for large complexes are inching up. Vacancy rates now run about 5% and are up about 10% from a year ago, according to Dallas-based AxioMetrics Inc.
Vacancy rates are being driven up in part by new construction. Some 3,000 apartments have opened here in the past year, nearly twice the volume seen in the prior year.
Two projects are responsible for nearly half of those apartments. In Costa Mesa’s arts district, Irvine Company opened the Enclave, an upscale, 890-unit complex near South Coast Plaza in March. It’s the first OC apartment project the company has built off the Irvine Ranch, a masterplanned development.
In Anaheim, Archstone-Smith this month is advertising the grand opening of its 884-unit Archstone Gateway project. The development, on State College Boulevard, is the lar-gest housing project built so far in the touted Platinum Triangle area.
Of the roughly 2,600 apartments now under construction or planned within Anaheim’s Platinum Triangle, close to half had been envisioned at one point as condominium projects. But Archstone Gateway was always slated to be apartments.
Archstone-Smith is advertising up to two months free rent for some units at the complex, which is opening this month. Rents are listed at $1,465 per month for a one-bedroom unit.
Archstone-Smith and other apartment complex owners are finding more competition from individual condominium and townhouse owners who are renting out their
units.
It is reported that there are more than 900,000 empty vacant single-family homes and condos available for rent across the country, which renters are often choosing instead of traditional complexes.
The iffy market hasn’t stopped all local developers from moving ahead with projects here.
Next to the Irvine Spectrum, Irvine Co. is starting construction for The Park, a several hundred-unit project going up alongside a similar apartment project that opened less than a year a go, the Village.
The 1,550-unit Village is more than 90% full, with much of its residents already working in the Spectrum, Irvine Co. said. There are more employees from Blizzard Entertainment Inc.,which is headquartered at the Alton Corporate Center at Laguna Canyon Road and Alton Parkway,living at the Village than any other company, officials said.
The Park is slated to open near the end of next summer, according to its Web site.
