Renters are seeing low vacancy rates, soaring rents and long waiting lists in the Inland Empire, where tenants can get more space for less, demand is through the roof and empty apartments “rent immediately,” property managers and housing experts say.
To the west, however, they see rising vacancies, falling rents and first-month-free move-in specials.
“Maybe you’re starting to see people say, ‘I don’t need to be in Los Angeles,’ ” real estate broker and property manager Lance Martin said. “The home (size) is a little more important.”
The coronavirus pandemic has turned Southern California’s rental market on its head.
With more people working from home, and COVID-19 shutdowns limiting access to restaurants, bars and museums, demand has shifted further down the freeway to the east, new rent data show.
“It’s a pattern that we actually see across the U.S., where these expensive metros are losing households to less expensive, adjacent and more affordable metros,” said Greg Willett, chief economist for apartment tracker ReaPage.
But “we used the Inland Empire as the poster child (for this pattern),” he added. “Among the 50 largest markets across the country, (the Inland Empire) is No. 1 for annual rent growth.”
Two other research firms, Yardi Matrix and Moody’s Analytics Reis, show a similar pattern, with the Inland Empire near the top of U.S. metro areas with the biggest rent growth rates, and L.A. County close to the bottom with the biggest rate drops. Orange County ranked in the bottom fifth of U.S. markets in all three rankings.
Households are leaving Los Angeles and Orange counties “for more affordable living options now that they’re working from home,” Willett said.
Inland Empire property managers see the trend, too, saying they’re flooded with applications for vacant units, driving up rents.
Martin, owner of Riverside-based Coldwell Banker Town and Country, which manages about 500 Inland Empire rental houses, said demand for single-family rentals “is unbelievable.”
“Everything we have is almost rented immediately,” Martin said. “Our average time to rent a vacant rental was 30 days a few years ago. Now, it’s less than a week.”
No vacancy
A Southern California News Group composite of rent surveys by four leading apartment trackers showed Inland Empire apartment rents averaged in the $1,592 to $1,671 a month range during the fourth quarter of last year.
That’s up 5-8% from the year before, data from RealPage, CoStar, Moody’s Analytics Reis and Yardi Matrix shows.
Vacancy rates, meanwhile, fell to 2.9% — the Inland Empire’s lowest rate in figures going back a decade.
In Los Angeles County, just the opposite is occurring: Vacancies are up and rents are down.
L.A. County apartment rents fell for a third consecutive quarter at the end of 2020, averaging $2,081 a month. That’s down almost 4% from an all-time high of $2,165 a month during the fourth quarter of 2019.
The L.A. County vacancy rate — 5.3% in the fourth quarter — was the highest in a decade.
Orange County’s average rent also fell to $2,081, down 0.9% from a year earlier. Its vacancy rate fell, dipping to 3.8%.
While Orange County is seeing a flight to more affordable housing to the east, Willett said, it’s “not to the degree that you see in L.A.”
Holding strong
Riverside apartments rent for about $2.50 per square foot, said Sara D’Elia, CEO of the REMM Group, a Tustin property management company handling new apartment lease-ups throughout the region.
Meanwhile, apartments rent for about $3.25 to $3.40 per square foot in Irvine and $3.50 to $5 per square foot in Los Angeles, she said.
“The cost per square footage is cheaper” in Riverside and San Bernardino counties, D’Elia said. “It makes it very attractive for renters who want to have a little more space for the home office — (and) a little more separation.”
Demand is rising even in “tertiary” markets like Hemet, about 1 ½-hours drive from Los Angeles, property managers say.
Commercial real estate agent Reza Ghaffari said rents have jumped $150 a month in the 60 days since he listed for sale a two-story, 137-unit apartment building in Hemet. The owner asked if he could rent out the model unit since he had more applications but no other vacancies.
“Because there was so much demand, they could raise the rent, and there would still be demand for it,” said Ghaffari, a manager with Marcus & Millichap’s Ontario office. “There are not enough units to rent out there in the Inland Empire, literally.”
Another client told Ghaffari he has a waiting list with 40-50 names. When landlords get a move-out notice, they’re able to rent to someone on the waiting list before the prior tenant moves out.
A building under construction in Perris is expected to lease out all 15 of its new apartments before construction is finished, he added.
“We definitely are seeing a migration,” said Martin, whose Coldwell Banker brokerage manages mostly single-family rentals. “We’re getting at least 10 qualified applicants on a rental before we shut off the spigot and rent to somebody.”
In L.A. and Orange counties, “folks are starting to offer move-in concessions, three to five weeks free,” D’Elia said. “You’re not seeing that in the I.E. You don’t have to compete with concessions. It’s holding strong.”
‘A reasonable price’
Luis and Monique Barragan had been living with relatives in Garden Grove to save money and get help taking care of Monique’s daughter when they decided to move into their first home together since they got married.
But rather than move someplace nearby, they rented an apartment in Riverside last September, even though Luis still works in Tustin. Monique operates an online shop from home. The family of six pays $2,550 a month for a three-bedroom, two-bathroom apartment in a new complex with pools, a fitness center and a clubhouse.
“Orange County didn’t offer the space we needed at a reasonable price,” Luis Barragan, 31, said in an email. “We liked the area, and it seemed affordable for the space we needed.”
The big question is whether the eastward migration will continue after the pandemic ends. Or will demand shift back to Los Angeles and Orange counties once bars, theaters and museums reopen?
Some economists believe urban centers will bounce back the way New York City did following the Sept. 11 attacks in 2001.
But researchers believe the work-from-home trend will continue for many workers — at least two to three days a week — long after COVID-19 has been tamed.
“There’s going to be a quality of life that’s going to push some of those folks to suburban regions,” said Adam Fowler, director of research for Beacon Economics. “Even if they have to drive an hour one day a week, that’s going to be a lot more doable than every day if … employees can work remotely.”
Source: Orange County Register
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