Integra Realty Resources - Orange County

Larry D. Webb, MAI, FRICS

Senior Managing Director
24411 Ridge Route Drive, Suite 100
Laguna Hills, CA 92653
Phone: 949-709-7200 x225
lwebb@irr.com

2015 ANNUAL

Orange County, CA | Multifamily

Market Commentary

Multifamily Snapshot
GOING IN CAP RATES (%)
7%

6.5%

6.4%

6%

5.1%

5%

5.6%

5.5%

5.7%

5.5%

4.9%

4.8%

4.0%

4%
3%
2%

The Orange County multifamily market contains an

overall inventory of about 214,667 units. The market has
generally strengthened over the last four years. The
improving job market and the lack of new construction
drove up demand for apartments in 2014, leading to a
record-low vacancy of 1.90%. It is expected that 4,238
units will be added to the Orange County inventory in
2015, resulting in a slight increase in vacancy.

1%

0%
Market

Region al

National

DISCOUNT RATES (%)

10%
8%

6.5% 6.8%

7.0%

7.6%

7.2%

7.8%

7.9%
7.2%

7.4%

8.1%

6%

But despite these increased vacancy rates, rents will

continue to increase as demand outpaces supply as forsale homes and condominiums become less affordable.
As new deliveries have arrived in Orange County, the
MSA has managed to sustain rent growth to slightly
above that of the national average. We expect an
increase of +2.0% in market rents each year for the next
three years.

4%
2%

MARKET CYCLE

0%
Market

Region al

National

MARKET RENT ($/UNIT)

$2,500
$1,905

$2,000

$1,770
$1,488
$1,227
$1,131

$1,482

$1,500

$1,631

Expansion

Hypersupply

Recovery

Recession

$1,217
$1,082
$898

$1,000
$50 0

$0
Market

Region al

National

VACANCY RATE (%)

7%
5.9%

6%
4.5%

5%
3.5%

4%

4.4%

4.4%
3.8%

4.7%

4.3%

3.4%

3%

Market Cycle: Expansion Stage 2

1.9%

2%
1%

0%
Market

Region al

National

Legend
Urban Multifamily Class A Suburban Multifamily Class A
Urban Multifamily Class B Suburban Multifamily Class B

Decreasing vacancy rates

Moderate/high new construction
High absorption
Moderate/high employment growth
Med/high rental rate growth

Integra Realty Resources - Orange County

Larry D. Webb, MAI, FRICS
Senior Managing Director
24411 Ridge Route Drive, Suite 100
Laguna Hills, CA 92653
Phone: 949-709-7200 x225
lwebb@irr.com

2015 ANNUAL

Orange County, CA | Multifamily

ORANGE COUNTY 12 MONTH FORECASTS
Categories

Urban Multifam ily Class A Urban Multifam ily Class B Suburban Multifam ily Class A Suburban Multifam ily Class B

Going In Cap Rate

Remain Steady - no change

Remain Steady - no change

Discount Rate

Decrease 1-24 bps

Decrease 1-24 bps

Market Rent Change (%)

2.40%

2.40%

Expense Change (%)

4.50%

4.00%

Absorption (Units)

1,140

760

In Balance

In Balance

4,238

Construction (Units)
Years to Balance

AVERAGE ANNUAL CHANGE IN VALUE

Tim e

Urban Multifam ily Class A Urban Multifam ily Class B Suburban Multifam ily Class A Suburban Multifam ily Class B

Previous 36 Months

Increase 2% - 3.9%

Increase 2% - 3.9%

Previous 12 Months

Increase .1% - 1.9%

Increase .1% - 1.9%

Future 12 Months

Increase 2% - 3.9%

Increase .1% - 1.9%

Future 36 Months

Increase 4%+

Increase 2% - 3.9%

About IRR
Integra Realty Resources (IRR) is the largest independent commercial
real estate valuation and consulting firm in North America, with over 200
MAI-designated members of the of the Appraisal Institute among over
900 professionals based in our 66 offices throughout the United States
and the Caribbean. Founded in 1999, the firm specializes in real estate
appraisals, feasibility and market studies, expert testimony, and related
property consulting services across all local and national markets. Our
valuation and counseling services span all commercial property types
and locations, from individual properties to large portfolio assignments.
For more information, visit www.irr.com or blog.irr.com.

TOP SEVEN CAP RATE FACTORS

National economic conditions/GDP growth

Local economy, job growth, unemployment
Property income growth
Risk premium of private real estate
Supply/demand
Availability of financing
Interest rates

Disclaimer
While the great majority of data and content contained herein is proprietary to IRR, this publication includes data provided by
third parties, and while the available data is presumed to be accurate, no representation or warranty is made regarding the
accuracy of the information contained in this publication. This publication does not render legal, accounting, appraisal,
counseling, investment or other professional advice. Should such services or other expert assistance be needed, it is
recommended that the services of a competent person or firm, having access to the details of the situation, be employed.