Data Courtesy of CoStarâ„¢
The Los Angeles multifamily market is contending with both weakened demand and considerable supply side pressure, driving vacancy to 5.8%, the highest this decade excluding 2020. Despite this, overall performance remains stable relative to the national landscape of 8.6%. However, when evaluated against other California cities, Los Angeles exhibits one of the highest vacancy rates in the state, trailing Orange County, San Francisco, and San Jose.
Elevated vacancy rates are attributable to both subdued demand and increased supply pressures. This year has witnessed some of the lowest levels of demand in the past decade, declining more than 50% compared to last year. Slower job growth and heightened unemployment both play a factor in weakening demand. Outmigration and population losses in recent years have also reduced the renter pool.
Simultaneously, Los Angeles has maintained a steady pipeline of new developments over the past several years, resulting in increased net deliveries—a 20% rise this year compared to last. Historically about 9,700 units a year in this past decade are delivered annually; this year is forecasted to deliver over 10,400 units. During the past decade, approximately 90% of new construction has comprised 4 and 5 Star assets. Notably, this category is the only to post positive absorption every year, averaging about 5,900 units absorbed a year.
12 Mo. Delivered Units
12 Mo. Absorption Units
Vacancy Rate
12 Mo. Asking Rent Growth
12 Mo. Sales Volume
Vacancy is predominantly concentrated among these newly delivered properties that have not yet stabilized. 4 & 5 star assets vacancy is currently at 9.7%, while 3 Stars is at 5.8% and 1 & 2 Stars 4.8%. Downtown LA has the highest vacancy rate among all submarkets at 10.9%. Over the past 12 months, approximately 1,700 units were delivered in this submarket, which is more than twice the amount delivered in Greater Inglewood (800 units), the next highest submarket for net deliveries in Los Angeles.
This oversupply has constrained landlords' pricing power, resulting in rents remaining relatively flat since 2023, with annual growth averaging less than 1%. In response, landlords have increasingly offered leasing concessions such as one month free on twelve-to fifteen-month leases—to attract tenants.
Looking forward, market fundamentals are expected to change as the supply pipeline reduces; new construction starts have declined by about 20% annually since 2021, and the number of units under construction is at its lowest level since 2015. In 2024, Los Angeles experienced a net population increase after three years of decline, which may signal a shift in demand trends. As supply pressure decreases and demand potentially rises, vacancy rates could compress and returning pricing power to landlords to increase rents. However, there is potential downside risk if the economy continues to weaken. If demand declines substantially due to macroeconomic issues, reducing supply may not be enough to keep vacancy rates low for Los Angeles.
You’ve got questions and we can’t wait to answer them.