lowest in a decade! Around 7,300 units began construction recently, down from a 2021 high of 13,700

November 13, 2024 | 10:39 AM

Driven by difficult financing and rising vacancy earlier in the decade, multifamily construction is cooling Los Angeles County.

Construction began on around 1,800 market-rate units in and around LA over the third quarter of 2024, up from around 700 units in the second quarter. However, activity during the past four quarters represents a clear moderation from starts seen several years ago.

During the past four quarters, around 7,300 units began construction in LA County, down from a high of 13,700 units that started work in a four-quarter period as recently as the middle of 2021. Activity on a four-quarter basis has not been this low in over a decade.

One of the most significant projects that recently started work is Alexan West End by Trammell Crow Residential in downtown Long Beach. The first two phases, designed to offer 600 units, are underway. Plans call for a third phase with an additional 150 units, with the development slated to open in 2026.

As a result of moderating construction starts around LA, the overall around 22,500 units under construction represent a dip from the around 27,700 units underway in early 2023. The ramp-down in starts indicates that construction levels will likely moderate further in the near term.

This trend of cooling starts is primarily driven by higher debt costs, which have impeded developers’ ability to secure financing at terms that make financial sense to achieve targeted returns. Although market conditions have recently steadied, 2022 and 2023 saw vacancy rise, which also likely contributed to developer hesitation.

Moderating construction activity in Los Angeles County will lead to a more moderate pace of deliveries in 2025. In tandem with steady, positive renter demand, apartment occupancies in the market should tighten next year.