For the first time in a decade, Los Angeles rents decreased due to the pandemic. In late 2020 and early 2021, demand intensified, particularly for larger units on the outskirts of Los Angeles, while Class A communities posted sharp declines. However, average rents appear to be stabilizing in Q1 2021, and some outlying submarkets are seeing increasing rents.
Even as a renter market, Los Angeles still faces struggles. Local opposition to new development combined with the high land price, construction restraints, and a complex permitting process had constricted multifamily development. In 2019, Los Angeles achieved $11 billion in multifamily trades, and although COVID-19 pushed many investors to the sidelines in 2020, near $7 billion in sales volume was achieved. This is a testament to the appetite for apartment assets in the market. The diversified economy and business presence will continue to attract affluent and educated renters and investors.
Pricing per unit stands at roughly $350,000/unit in comparison to the national average, $210,000/unit. While deal volume in 2020 slowed, it is expected to rise in 2021. Average pricing and cap rates have remained steady. The current average cap rate is around 4.5% and remains well below the U.S. average of 5.5%.