Low vacancy rates and limited inventory have made Long Beach a “landlord’s market” in recent years, according to George Bustamante, vice president of Coldwell Banker Commercial BLAIR WESTMAC (CBCBW). Rents have been rising about 5% a year for the past few years, he said, but that could soon change. The AMLI Residential Building at 245 W. Broadway has brought 222 Class A residential units online, with another 1,200 units from other developments expected to open over the next year. Bustamante and fellow CBCBW vice president Steve Warshauer said the increased inventory could reduce pressure on Class B and C units down the line.
“There are people in B and C [Class] properties that would love an A [Class unit], but until recently, none of that was available in Long Beach,” Warshauer said. Most of this new development has been concentrated in downtown Long Beach, where parking and amenities are more available, he added. Already, the AMLI building is about 30% leased, according to data from his firm.
“The need and demand for housing in the city center seems to be quite good, as people who rent 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 transport.”
Despite annual 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 multifamily brokerage firm Stepp Commercial. The average rent across all apartment classes and sizes is around $1,800 a month, Bustamante said. That’s much more affordable than the average rent in Huntington Beach ($2,235 per month) or the greater Los Angeles-Long Beach-Anaheim metro area ($2,360/month), he said.
“We’re moving people and businesses here because the sale prices and the rental prices are very, very competitive,” Warshauer said.
Long Beach offers a diversity of multi-family housing options and prices, Bustamante continued. On the new product going live, he said studios average $2,000 per month for 500 square feet, or $4 per square foot. The older product in West Long Beach costs $2 per square foot and less, by comparison. “And you have everything in between,” he said.
The average vacancy rate for all multifamily inventory in Long Beach hovers between 3.9% and 4.5%, Stepp said. Vacancy rates are lowest in East Long Beach, he continued. “The most affordable rental locations in Long Beach are the North and West submarkets due to older, unrenovated inventory,” he explained.
Bustamante and Warshauer said the recent approval of a tenant relocation assistance ordinance by the Long Beach City Council would negatively impact the real estate market. The order, passed May 21, requires landlords to help tenants with moving costs of up to $4,500 if their rent is increased by more than 10%. Warshauer said that as a result of the board’s decision, CBCBW clients pulled in about $4 million to $5 million in investment offers for Long Beach multifamily properties. Investors fear such policy changes could lead to rent controls, which could further hamper new investment, he said.
Steve Bogoyevac, senior managing director of Marcus & Millichap, said he heard similar concerns. “I’m curious to see how it’s going to go. [In] other cities that have rent control, landlords stop investing in their buildings because they are capped on the price at which they can rent them. . . and it is more difficult for them to maintain their properties,” he said.
However, Stepp said it’s too early to tell how tenant protection policies will affect the market in the long run. “There are still many unanswered questions and undetermined details,” he told the Business Journal. “While some sellers have decided they would like to move away from the Long Beach market . . . many landlords are trying to figure out what the new tenant protection policies really mean for their investments.