Orange County multifamily market report (Q2 2021)July 15, 2021
Orange County's multifamily demand continued its momentum, with vacancies near an all-time low at 2.8 percent second quarter, compared with 3.9 percent first quarter and down from 5.8 percent the same period a year ago. Developers continue to target Orange County, with 6,171 units, or 2.5% of existing inventory, under construction.
A push for increased vaccination rates have allowed for greater reopening efforts, enabling the Orange County unemployment rate to rebound from a high of 14.9 percent in May 2020 to 6.2 percent in April 2021. Post-COVID office-using job losses have totaled 3.3 percent compared with leisure and hospitality job losses that totaled 18.1 percent, underscoring the disproportionate impact the pandemic had on the discretionary segments of the local economy.
In 2020 the pandemic saw demand for multifamily pullback over much of the West Coast region, however Orange County outperformed. This momentum continues into 2021, with vacancies near an all-time low. Vacancy was 2.8 percent second quarter compared with 3.9 percent first quarter and down from 5.8 percent the same period a year ago.
Developers continue to target Orange County, with 6,171 units, or 2.5 percent of existing inventory, under construction. Even though development activity is significant, it's still low from a historical perspective. All told, 18,000units have delivered to the market over the past five years.
Orange County multifamily rents are amongst the highest on the West Coast. Rents declined at the start of the outbreak but have been increasing ever since. Following a short period of rent losses at the beginning of the pandemic, rent levels have recovered quickly and are now well above the pre-pandemic peak. Average monthly asking rent is $2,307, the highest on record for the market. Moreover, concessions have come down, as the economy improves with less than 15% of communities offering rent specials.
Investors are returning to the market since the start of the pandemic, with elevated sales volumes compared to last year. Pricing has increased, and cap rates are at new lows. Some trades involved buyers teaming up with public agencies to convert market rate housing to affordable units.