New, expensive apartments in the city center are almost full; What That Says About Our Housing Market • Long Beach Business Journal
Almost all of the new condominium towers and low-rises that have sprung up around downtown Long Beach are filling up, and it’s happening quickly.
Even with relatively high prices compared to the rest of the city, the new skyscrapers and high-end apartment buildings have had no trouble finding tenants. In fact, according to the Downtown Long Beach Alliance’s most recent economic profile, the 22 properties built in the area since 2000 were already 93% full. Of the 3,492 new units listed, only 242 are vacant.
Even one of the newest buildings, the 432-unit Onni East Village, which just opened last February, is already 50% full, Austin Metoyer, president and CEO of the Downtown Long Beach Alliance, told me recently.
“People are moving downtown to fill these apartment buildings that are going up,” Austin said.
The Magnolia Building, which opened last May, was nearly half full in just three months, with 46% of its units leased by July of that year. This building now has an occupancy rate of 96.5% with 137 of the 142 homes rented.
Even the Shoreline Gateway Tower, which has the highest rents in the city, is about 90% full.
Part of the reason there is so much demand for new housing now is that the city has not seen enough construction to keep up with demand over the past 30 years. Between 1991 and 2016, the city of Long Beach never allowed more than 1,000 new homes to be built a year, thousands fewer than the state said was necessary to keep up with housing needs.
Naturally, this shortage of surplus housing has had a direct impact on rising rents.
“The biggest driver of rents in the next quarter is vacancy in the previous quarter, so when vacancy is low, rents go up,” said Richard Green, director of the Lusk Center and co-author of the 2022 Casden Multifamily Outlook report.
But studies have shown that adding supply, even at the highest levels of the market, helps keep rents from growing.
“Most people think there are separate markets for new ‘luxury’ apartments, single-family homes, low rent and older buildings,” said Shane Phillips of the Lewis Center for Regional Policy Studies at UCLA. But “research shows that these are all part of the same market, and when you change one part it affects the entire market.”
“Constructing a new apartment building (even) in a low- or middle-income area results in lower rental growth in surrounding buildings due to increased competition,” Phillips said, echoing a report the center wrote in 2021.
“Not building housing does not prevent people from moving somewhere,” he said.
“People imagine people are coming from somewhere else because market-rate units are expensive, but we have a lot of wealthy people here,” he said. “People are having kids, people are graduating, people want to get out and have their own space. If we don’t create those spaces, there will be more demand for stable housing stock.”
This means that all the new units built in the past few years have likely helped insulate existing buildings from rising rents, even as we attract hundreds of new, high-paying jobs in the aviation and health care sectors.
In fact, rental prices fell 5.1% in Long Beach citywide after more than 1,200 new units were built in 2021 and 2022. As long as buildings are full, the best way to stop runaway rent growth may be through more construction. And with the state mandate to plan more than 26,000 new homes in Long Beach by 2029, there are sure to be more developments on the way.
“We will have 1,500 to 2,000 units available online in the next few years,” DLBA CEO Metoyer said. “And that could lead to some of those rents that we’re seeing going down because of the additional supply.”
There are already more than 1,000 new homes under construction in the southeast corner of the city near 2nd & PCH; A 900-unit development slated to replace the former City Place shopping center on Fourth Street downtown; The nearly completed 189 units along Broadway and the Park; a 23-story building at 3rd Pacific that will contain 271 units; Now a potential 21-story building that could replace the former Long Beach Café with more than 200 homes is headed to a Planning Commission vote in November.