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Leasing Velocity Up in OC

CoStar Market Insights: The Pace of Demand Has Strengthed in the Newest Units
April 9, 2018
As 2018 deepens, Orange County is in the midst of its most expansive multifamily supply wave this cycle. More than 4,600 units delivered in 2017 with an additional 7,500-plus units expected to be ready by the end of 2019.

And while the glut of new inventory is heavily focused in the Irvine area, developers have spread out across much of the county, tapping into pent-up demand for luxury units from Aliso Viejo and Huntington Beach to Brea and Anaheim. Interestingly, demand has picked up for these new communities compared to the last several years.

When examining the lease-up trends among properties built since 2015, Orange County has experienced an uptick in leasing velocity in each year. Taking into account only communities with more than 100 units, 2015 inventory averaged a leasing velocity of 23 units per month. In 2016, that absorption rate picked up to 25 units per month. And what of last year’s new apartment units? While a number of those communities are still in lease up, they are so far averaging a velocity of 26 units per month.

However, demand is not created equally across Orange County. In South County, the Shea development in Aliso Viejo – Vantis Apartments – which delivered in 2017, averaged more than 35 units per month and stabilized in under a year. Meanwhile in Laguna Hills, Alliance Residential’s development – Broadstone Cavora – is leasing a bit more slowly. The 2017 delivery has averaged leasing about 21 units per month.

On the surface, cost doesn’t appear to account for the difference since floor plans average about $.07 difference between the two and concessions were largely similar at one month free.

In contrast, The Alton, an Equity Residential project that delivered in Irvine in 2016, stabilized in less than a year after averaging more than 30 units per month, while the Westview, an Irvine Company project in Irvine Spectrum, delivered last year and has averaged a leasing velocity of a notch about 40 units per month.

Even as construction costs continue to rise, and rent growth has slowed from 2015’s peak, developers have shown no sign of slowing down. The continued wave of supply in store in 2018 and 2019 is likely to add some pressure to the market. But so far, demand has remained above the long-term average, according to CoStar data.

CoStar Market Insights provides a snapshot of recent real estate trends. The CoStar Market Analytics team monitors commercial and multifamily real estate across 390 metro areas, with a granular understanding of the projects, players and economic trends that move these markets.

Learn how CoStar Market Analytics can add to your market knowledge, helping to minimize risk and maximize returns.

Joshua Ohl, senior market analyst covering the Orange County market.

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