Low vacancy rates and limited inventory have made Long Beach a “landlord’s market” in recent years, according to George Bustamante, vice president at Coldwell Banker Commercial BLAIR WESTMAC (CBCBW). Rents have risen by about 5% annually over the last few years, he said, but that may soon change. The AMLI Residential building at 245 W. Broadway brought 222 Class A residential units online, and another 1,200 units from other developments are slated to open within the next year. Bustamante and his fellow CBCBW Vice President Steve Warshauer said the increase in inventory could lessen the pressure on B and C Class units down the line.
“There are people in B and C [Class] properties that would like an A [Class unit], but until recently there was none of that available in Long Beach,” Warshauer said. Most of this new development has been focused in Downtown Long Beach, where parking and amenities are more available, he added. Already, the AMLI building is about 30% leased up, according to his firm’s data.
“The need and the demand for housing in the downtown area seems to be pretty good, because people who rent, they want the amenities close by,” Bustamante said. “They want to be able to walk to a restaurant, they want to be able to walk to a grocery store, they want . . . public transportation.”
Despite the yearly rent increases, Bustamante noted that current Long Beach rents are still “a bargain” compared to neighboring Orange County and Los Angeles. The median market rent for the City of Long Beach is $1,515, according to Robert Stepp, president and founder of multi-family brokerage firm Stepp Commercial. The average rent across all classes and sizes of apartment units is about $1,800 a month, Bustamante said. That’s significantly more affordable than the average rent in Huntington Beach ($2,235 per month) or the greater Los Angeles-Long Beach-Anaheim metropolitan area ($2,360/mo.), he said.
“We’re getting people and businesses moving here because the sale prices and the rent prices are very, very competitive,” Warshauer said.
Long Beach offers a diversity of multi-family housing options and prices, Bustamante continued. Of the new product coming online, he said studios average about $2,000 per month for 500 square feet, or $4 per square foot. Older product in West Long Beach is $2 per square foot and below, by comparison. “And you’ve got everything in between,” he said.
The average vacancy rate for all multi-family inventory in Long Beach is hovering between 3.9% and 4.5%, Stepp said. Vacancy rates are lowest in East Long Beach, he went on. “The most affordable rental locations in Long Beach are the north and west submarkets due to the older, un-renovated inventory,” he explained.
Bustamante and Warshauer estimated that the recent approval of a tenant relocation assistance ordinance by the Long Beach City Council would adversely impact the real estate market. The ordinance, passed on May 21, requires landlords to assist tenants with relocation costs up to $4,500 if their rent is raised more than 10%. Warshauer said that, following the council’s decision, CBCBW clients withdrew about $4-5 million in investment offers for Long Beach multi-family properties. Investors are afraid that policy changes like these could lead to rent control, which could further hamper new investment, he explained.
Steve Bogoyevac, senior managing director for Marcus & Millichap, said he had heard similar concerns. “I’m curious to see how it’s going to play out. [In] other cities that have rent control, landlords stop investing in their buildings because they’re capped on what they can rent them for . . . and it makes it harder for them to maintain their properties,” he said.
However, Stepp said it was too early to know how tenant protection policies will affect the market in the long term. “There are still many unanswered questions and undetermined specifics,” he told the Business Journal. “While some sellers have decided they would like to move away from the Long Beach market . . . many owners are trying to determine what the new tenant protections policies really mean for their investments.”