Apartment construction surges across the Southland amid rising rents

Apartment construction is surging, in Southern California and nationwide.

New apartments and condominiums drove building permits up 8% in April from the prior month, to their fastest pace in nearly six years, the Commerce Department reported Friday.

Housing starts which measure the launch of construction climbed 13.2%. Most of the growth came in multifamily building, which is now back at pre-recession levels and up 15% through the first four months of the year compared with the same period last year, even as permits for single-family homes remain sluggish.

All this building comes as rents continue to rise in Southern California and elsewhere and reflects growing demand for apartments and optimism from big builders that demand will keep pushing those rents higher even as more supply comes onto the market.

"It's a wildly different market than it used to be," said Steve Wilson, executive vice president for West Coast operations at AvalonBay, a large real estate investment trust that owns 12,000 apartments in Southern California. "I've got to believe we can get 4% to 5% rent growth a year over the next 10 years."

Wilson, like others in the multifamily business, sees multiple factors driving demand.

The economy is improving, which means more twentysomethings who've been living with their parents or piling in with roommates can afford their own apartments.

At the same time, the for-sale housing market is still tough with prices and lending standards high keeping more thirtysomethings paying rent instead of jumping into homeownership.

And then, he said, there's a growing cadre of people of all ages who are renters by choice, preferring the flexibility of an apartment and often willing to pay for top-end properties.

So AvalonBay is building. The company has seven projects under construction in the Southland including the Ava in Little Tokyo, where studio apartments start at $1,995 and an eighth on the way. Although many multifamily builders moved first into even hotter markets such as San Francisco and Seattle, Wilson said he now sees more potential for growth in the Southland.

Originally posted here:
Apartment construction surges across the Southland amid rising rents