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Los Angeles’ multifamily market, supported by diversified employment sectors and sustained housing demand, faces new challenges following the January 2025 wildfires that affected more than 18,000 structures in Los Angeles County.
“Our thoughts are with everyone who’s been impacted by the devastating wildfires,” said Lynnette Antosh, Senior Regional Sales Manager at Chase. “We’re in close communication with clients who have been affected and are working to provide assistance however we can.”
While the full community impact of the wildfires is still being assessed, LA’s diverse economic base remains a major engine powering its multifamily market.
Los Angeles vacancies are projected to stabilize at around 4.4% by year-end, according to Moody’s, remaining below the national average of 6% despite significant new construction in the metro area. Asking rents are expected to rise 2.3% year over year. The projections, prepared based on data from the fourth quarter of 2024, don’t account for displacement caused by the fires.
“Los Angeles remains a dynamic and robust metro,” said Matthew Krasinski, Senior Regional Sales Manager at Chase. “Multifamily fundamentals continue to click along.”
Robust workforce housing demand in LA
The Los Angeles apartment market added nearly 5,000 new apartment units in 2024, according to Moody’s. Population growth accelerated along with construction, but not enough to offset a 1.6% population decline since the start of the pandemic.
Still, supply and demand “struck a relative balance in LA,” said Lu Chen, Director and Senior Economist at Moody’s. “The growing number of households allowed the recent inventory growth to be balanced off.”
That kept the city’s overall vacancy flat in the second half of 2024. But vacancies were even tighter at Class B and C properties: 3.5%, compared with 5.5% for Class A properties, according to Moody’s.
“Workforce and affordable housing properties tend to be well-insulated from the impact of new construction,” Krasinski said.
Interest rate uncertainty
The Federal Reserve began easing interest rates in 2024 but paused cuts once anticipated for early 2025. Predicting rate decreases is complex, depending on factors including the labor market, inflation and how the new administration’s policies will affect economic trends.
Cap rates have risen slightly in response to the elevated interest rate environment, and while there’s been some softness in property values, they’ve generally held up well, Krasinski said.
“In situations like this, there’s an expectation that there would be significantly discounted deals, but that’s just not happening. Everybody’s holding their chips and looking for opportunities to strategically deploy them,” he said.
Investors seeking or refinancing apartment loans should consider prepayment options that provide flexibility when interest rate relief arrives.
Optimizing cash management
Rising operational costs require strategic liquidity management. Investors can improve their cash positions by using automated payment systems to collect payments faster while establishing longer payment terms with vendors. Even cash reserves required for operations can earn interest.
Creating a liquidity management plan—or reviewing your existing plan—with your treasury services team can help you make the most of your liquidity.
“When you’re working with experts who specialize in working with commercial real estate investors and have products tailored to real estate investors, it can help you make sure you’re deploying capital efficiently,” Antosh said.
Rising insurance costs
A variety of property management expenses have been increasing, but insurance costs have seen especially large jumps.
Underwriters closely evaluate property maintenance and building systems when setting premiums, so staying on top of capital projects that keep a property in good shape can help, Krasinski said.
“Insurers will look at how recently you’ve replaced the roof, the pipes a building has or whether the electrical system has been upgraded,” he said. “It’s about controlling the factors you can.”
Whether you’re ready for financing or looking to streamline your operations, reach out to our Los Angeles lending, payments and liquidity team.
JPMorgan Chase Bank, N.A. Member FDIC. Visit jpmorgan.com/commercial-banking/legal-disclaimer for disclosures and disclaimers related to this content.
