Multifamily Market Overview

Gateway Cities, Los Angeles

The following cities, and some unincorporated areas of the Southeast Los Angeles submarket, comprise the Gateway Cities region: Artesia, Avalon, Bell, Bellflower, Bell Gardens, Cerritos, Commerce, Compton, Cudahy, Downey, Hawaiian Gardens, Huntington Park, La Habra Heights, Lakewood, La Mirada, Long Beach, Lynwood, Maywood, Norwalk, Paramount, Pico Rivera, Santa Fe Springs, Signal Hill, South Gate, Vernon, Walnut Park, and Whittier.

The Gateway Cities of Los Angeles occupy a crescent-shaped area of land along the county’s southeast border with Orange County. This area is a prime place for business because it provides well-balanced, ethnically diverse communities with a highly skilled and educated workforce. The submarkets have some of the lowest vacancy rates in the Los Angeles metro area. Occupancies have historically held up better in recent years in areas of Los Angeles County that are both affordable and have a moderate construction pipeline. The rents in the area are among the lowest in the greater Los Angeles area as well.

Highlights

• The Enclave in Paramount sold for $128.5 million ($420,000 per unit) in February 2022, the highest transaction in almost two years in the Gateway Cities submarket.
• The Southeast portion of the submarket has some of the most affordable communities, both on absolute and per-unit terms.
• Both South and Southeast submarkets have vacancy rates well below the market average and are outperforming the greater Los Angeles apartment market for several quarters.
• The South portion of this submarket is one of Los Angeles county’s largest submarkets, with about 26,000 units in approximately 1,300 market-rate properties.

Rents | Vacancy | Construction

Vacancy rates are well below the market average and are outperforming the greater Los Angeles market for several quarters.   

The submarkets that comprise the Gateway Cities have the lowest vacancy rates in Los Angeles County. The South Los Angeles submarket has a vacancy rate of 2.4 percent. While the Southeast submarket currently has a vacancy rate of 2.8 percent, making it among the tighter submarkets in the county. Vacancy is also significantly lower than the two-decade submarket average of 4.5 percent. Gateway Cities have outperformed the greater Los Angeles apartment market for several years. However, 2022 saw negative renter demand in the last few quarters, and the 2023 outlook appears dim. Despite slowing demand, the Gateway Cities submarket is forecasted to benefit from the upcoming construction pipeline for the year, resulting in historically favorable vacancy rates. The average asking rent in South Los Angeles is $1,840 per month, which is near the bottom of the greater Los Angeles apartment market. The average asking price has increased by 3.3 percent in the last year, compared to 2.5 percent in the Los Angeles metro area. In recent years, South Los Angeles has outperformed in terms of rent increases. In contrast to the Greater Los Angeles apartment market, rentals in South Los Angeles continued to grow in 2020. The average asking rent in Southeast Los Angeles is $1,630 per month, which is among the lowest in the greater Los Angeles apartment market. Over the last year, average asking rates have increased by 4.6 percent, exceeding the 2.5 percent increase found across the Los Angeles metro area. Regarding construction, the South submarket currently has 200 apartments being developed. South Los Angeles is one of Los Angeles’ major submarkets, with about 26,000 units in approximately 1,300 market-rate properties. 220 units are currently being developed in the Southeast area, and in the first two quarters of 2023, LuMar Corporation will finish construction on a 31-unit project in Lincoln heights, 1126 Cornwell St.

Sales

South Los Angeles, by the numbers in the past 12 months

• Proposed units Next 8 Quarters: 478
• Delivered Units Next 8 Quarters: 205
• Average vacancy rate: 2.4%
• Average asking rent: $1,840
• Average price per unit: $320,000
• Sales Volume: $161,000,000

Southeast Los Angeles, by the numbers in the past 12 months

• Proposed units Next 8 Quarters: 1,655
• Delivered Units Next 8 Quarters: 215
• Average vacancy rate: 2.8%
• Average asking rent: $1,630
• Average price per unit: $300,000
• Sales Volume: $632,000,000

Given the prevalence of lower quality, smaller communities in the submarket, small-scale private investors typically dominate transaction volumes in both submarkets. 

The Gateway Cities submarkets saw excellent transaction volume over the past 12 months. South Los Angeles’ market pricing per unit is $320,000, which is 25 percent lower than the L.A. metro average. The average cap rate, 4.1 percent, is slightly higher than the L.A. metro average. The submarket’s investment activity in the last 12 months was $250 million, compared to the submarket’s 10-year average of $225 million. In 2022, 90 percent of sales levels were concentrated in the year’s first half. The increase in debt expenses last year negatively influenced transaction levels near the end of the year. Southeast Los Angeles’ apartment market pricing per unit, $300,000 per unit, is 30 percent lower than the Los Angeles metro average, owing to lower rentals, asset quality, and demographics. The average cap rate, 4.2%, is higher than the metro average. Dollar investment activity in the submarket was significant over the last year, totaling $624 million.