Orange County Multifamily Market Report

Market Overview

Orange County’s multifamily market shines with its historically low apartment vacancy rates. Although there was a temporary decline in occupancy, the market is now witnessing a rebound in demand. The recent completion of new apartment buildings, particularly in areas like Irvine, has expanded housing options for high-income renters, adding to the market’s appeal. Although rent growth has slowed down in the past year due to heightened competition, the market is exhibiting promising signs for rental growth in the near future. Despite some challenges, such as disruptions in construction lending and sluggish sales activity due to higher capital costs, the market’s long-term demographic trends are expected to drive valuations higher in the future.

Highlights

• With a vacancy rate of 4.3%, Orange County has the fourth lowest vacancy rate out of the top 50 U.S. markets, following New York, San Diego, and Milwaukee.
• The 12-month sales volume is $1.6 billion, surpassing the national average of $1.2 billion.
• Orange County ranks as the fifth most expensive major market in the U.S., with an average rent of $2,610/month.
• There are currently 16 properties under construction, totaling 5,570 units.

Rents | Vacancy | Construction

Anaheim, the most affordable neighborhood in orange county, experienced the strongest rent growth at nearly 3%, while rents in Newport Beach’s most expensive neighborhood fell by more than 4%.

Rents in Orange County’s multifamily market average $2,610 per month. Asking rents for Class A properties in Orange County currently average $3,180 per month, with variations ranging from $4,500 per month for three-bedroom units to $2,500 per month for studio apartments. Asking rents for Class C apartments average $1,950 per month and maintain higher occupancy rates compared to Class A properties. Additionally, the vacancy rate in Orange County currently stands at 4.3%, which is significantly lower than the national average of 6.8%. However, upward pressure on vacancy is expected to pick up for the remainder of the year, with stagnant demand and anticipated supply growth. Orange County currently has 5,570 units under construction, which makes up 2.2% of existing inventory. Notably, development is mainly concentrated in the Irvine submarket.

Sales

Sales volume in orange county stands at $1.6 billion for the past 12 months.

Orange County is considered a coastal gateway market, attracting national and local investors with minimal involvement from foreign capital. They are attracted to the market’s strong demand and historically outperforming rent growth. Private buyers account for 65% of investment volume over the past decade, while institutional buyers make up 19%. Cap rates are currently trending at 3.9% on average but are expected to rise upwards of 100 basis points in 2023, indicating a potential adjustment in pricing.

OC By the Numbers in the Last 12 Months

• Units Under Construction: 5,570
• Units Delivered: 2,002
• Vacancy Rate: 4.3%
• Asking Rent Growth: 1.0%
• Average Price Per Unit: $419K
• Sales Volume: $1.6B
• Sale Comparables: 128