New policy for tenants, additional units may reduce apartment rental rates

Low vacancy rates and limited inventory have made Long Beach a “homeowners market” in recent years, according to George Bustamante, vice president of Coldwell Banker Commercial BLAIR WESTMAC (CBCBW). Rents have increased by around 5% per year over the past few years, he said, but that could change soon. The AMLI residential building at 245 W. Broadway has brought 222 Class A residential units online, with 1,200 more units from other developments scheduled to open within the next year. Bustamante and his fellow CBCBW vice president Steve Warshauer said the increased inventory could reduce the pressure on Class B and C units down the line.

“There are people in B and C [Class] properties that would like an A [Class unit], but until recently none of this 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 company.

“The need and demand for housing in the city center appears to be quite good, as people who rent want amenities nearby,” 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 the annual rent increases, Bustamante noted that Long Beach’s current rents are still “a bargain” compared to neighbors in 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 apartment classes and sizes is around $ 1,800 per 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 metro area ($ 2,360 / month), he said.

“We get people and businesses to move here because the selling prices and rental prices are very, very competitive,” Warshauer said.

Long Beach offers a variety of multi-family housing options and prices, Bustamante continued. On the new product released, he said studios average about $ 2,000 per month for 500 square feet, or $ 4 per square foot. In comparison, an older product in West Long Beach costs $ 2 per square foot and less. “And you have it all in between,” he said.

The average vacancy rate for all multi-family dwellings in Long Beach is between 3.9% and 4.5%, Stepp said. Vacancy rates are the lowest in East Long Beach, he continued. “The most affordable rental locations in Long Beach are the North and West submarkets due to older, unrecovered inventory,” he explained.

Bustamante and Warshauer believed that the recent approval of a tenant relocation assistance order by Long Beach City Council would have a negative impact on the real estate market. The order, passed May 21, requires landlords to help tenants cover relocation costs up to $ 4,500 if their rent is increased by more than 10%. Warshauer said that following the board’s decision, CBCBW clients withdrew approximately $ 4-5 million in investment offers for Long Beach’s multi-family properties. Investors fear that such policy changes could lead to rent controls, which could further hamper new investment, he explained.

Steve Bogoyevac, senior managing director of Marcus & Millichap, said he heard similar concerns. “I’m curious to see how it’s going to play out. [In] In other cities that have rent controls, landlords stop investing in their buildings because they are capped on what they can rent them for. . . and it is more difficult for them to maintain their properties, ”he said.

However, Stepp said it was too early to know how tenant protection policies would affect the market in the long term. “There are still a lot of unanswered questions and unclear details,” he told the Business Journal. “While some vendors 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.