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LA drew $19B in multifamily investments over past year

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(iStock)

Multifamily investors love Los Angeles.

Investors have spent a total of $18.6 billion on multifamily properties in Los Angeles since the first quarter of 2021, according to a report from CBRE. That’s about 5 percent of total multifamily investment in the U.S. over the last year.
L.A. was the fourth-most popular city for multifamily investors by dollar volume over the last four quarters.

Propelled by a market with low interest rates and high rent growth, investors spent $374 billion on multifamily properties over the last year — triple what they spent from March 2020 through March 2021.

It was officially the most popular commercial real estate class across the U.S., making up 37 percent of all investments in the first quarter, according to the report. About 20 percent was spent on office properties.

And CBRE says it’s not slowing down. Investors are still looking to L.A. “despite interest rate pressure.” At the beginning of May, the U.S. Federal Reserve raised its benchmark interest rates by 0.5 percent — the largest rate hike since 2000. The Fed is expected to keep raising interest rates this year, making it more expensive for borrowers.

Part of the attraction to L.A. is increasing rent growth. Rents increased 14 percent in the first quarter, compared to the same period in 2021. Orange County and the Inland Empire saw even higher jumps during the same period — 18 percent and 17 percent, respectively.

L.A.’s rent growth over the last year was tame compared to other regions in the U.S., such as West Palm Beach in South Florida, where rents jumped 30 percent in the first quarter compared with a year prior. Rents in Phoenix, which was a popular market for multifamily investors, jumped 26 percent.

Rents in only two markets out of the 69 tracked by CBRE have not yet climbed to pre-pandemic levels: San Francisco and San Jose. In San Francisco, rents are still 10 percent lower than they were at the beginning of 2020.

Dallas-Fort Worth was the city that saw the most multifamily investment capital over the last year, with investors spending $29 billion on multifamily properties over the last year — about 8 percent of all apartment investment across the country. Atlanta came in at number two, with investors spending $21 billion.