San Fernando Valley multifamily market

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1 Central San Fernando Valley multifamily market With an area spanning 69 square miles and holding more than, multifamily properties, the San Fernando Valley contains some of Los Angeles most diverse real estate markets. This report dives into three different markets Van Nuys, Sherman Oaks, and Panorama City, exposing the changes in pricing between Quarter 26, Q 26 (the midpoint), and Q 27. The information is broken down between markets, and further dissected between rent controlled, and non-rent controlled buildings.

2 VAN NUYS Van Nuys had a total of 44 transactions in the three analyzed quarters, half of which occurred in Q of 26. This transaction volume can contribute to the slightly lower price per unit and price per square foot metrics for Q. Simple supply and demand laws would tell us that with a larger inventory available prices would ultimately fall. Inventory was constrained at both the beginning of Q 26 and 27-price per unit and price per square foot were almost mimicked between the two quarters. Non-rent controlled buildings in Q 27 had a significant increase in their gross rent multiplier (GRM) and cap rate with an average of.28 GRM and.92% cap rate from the five transactions that occurred. TRANSACTION VOLUME DATA 2 2 $22.6 $24.99 $2.28 $ $2.2 $ Q - 26 Q - 26 Q AVG PPSF

3 Q - 26 AVG DATA NON- $72,49.8 $ % $268,7. $ % 4 4.9% 4.28% 4.4% 4.%.97%.92% Q - 26 AVG DATA NON- $6,4.84 $ % $28, $ % 2 Q - 27 AVG DATA NON- $72,48.98 $ % $242, $ % AVG CAP RATE Rent Controlled Non-rent Controlled

4 Sherman Oaks experienced 7 transactions in the three analyzed quarters, with the majority being rent controlled properties. Price metrics stayed relatively similar between Q 26 and Q 26 with the average price per unit dipping $,68 into Q. Only transactions occurred in Q 27, with one compelling transaction closing at a 9.77 GRM and a 2.4% cap rate. Sherman oaks Non-rent controlled properties in Sherman Oaks remained the belle of the ball, this can be attributed to Sherman Oak s affluent status and high rental rates. Between all analyzed quarters only two non-rent controlled buildings sold, both closing at over $49, per unit. TRANSACTION VOLUME DATA 7 7 Q - 26 Q - 26 Q

5 Rent Controlled Non-rent Controlled AVG CAP RATE % 4.% 4.%.9%.8% N/A Q - 26 AVG DATA NON- $247,6. $ % $49,28.7 $ % Q - 26 AVG DATA NON- $26,74.9 $ % $42,6.8 $ % Q - 27 AVG DATA NON- $282,6. $ % N/A N/A N/A N/A $46.4 AVG PPSF 4 2 $28.48 $47.69 $ $28.2 N/A

6 TRANSACTION VOLUME DATA Q - 26 Q - 26 Q - 27 Panorama City had transactions total in all three quarters,most of them being with rent controlled assets. Rent Controlled Non-rent Controlled Price per unit and price per square foot fluctuated between the quarters but income numbers held steady with most transactions closing between -2 GRM. 2 2 $28.26 $87.8 $84.28 $28.79 $ Non-rent controlled assets had a strong showing with the deals closing at $76,92(Q 26) and $248, (Q 27) price per unit, but it is important to note both transactions involved buildings with bedroom and 2 bedroom unit mixes. N/A AVG PPSF

7 PAnorama City Q - 26 AVG DATA % N/A 4.9%.72%.% 4.2% AVG CAP RATE NON- Q - 26 AVG DATA NON- Q - 27 AVG DATA NON- $7,. $ % N/A N/A N/A N/A $4,.9 $ % $76,92.8 $ % $76,4.88 $ % $248,. $ % 7

8 The multifamily real estate market is still strong and the prices continue to stay aggressive through the San Fernando Valley and its individual markets. This can be attributed to the favorable interest rates that have been available, as well as constrained inventory and competition in the market. Most recently at their March meeting, the Federal Reserve raised interest rates by a quarter of a point, and it appears that they will likely increase rates two more times this year. What this means for the real estate market is that cost of capital will be more expensive for investors which will eventually lead to the deflation of the aggressive pricing that we are seeing in today s market. How quickly this will happen is uncertain, because there tends to be lag between interest rates and prices, but it will affect the market nonetheless. The San Fernando Valley also contains more than,2 apartment buildings that fall under the Los Angeles Soft-Story Ordinance. These buildings have been determined to have weak structures, and the city has passed an ordinance requiring mandatory retrofits to reduce risk in the event of an earthquake. Owners are responsible for completing the retrofits as well as taking on a bulk of the cost for the plans and construction. We are still in the early stages of the ordinance, but have already seen several of these properties begin to hit the market. As compliance dates get closer we expect to continue to see these soft-story properties become available for sale. This will lead to increased supply, and prices may fall across all multifamily assets due to decreased competition. Data Source: CoStar If you have any questions about the market or your own assets, please don t hesitate to reach out. 8 Aaron Guido () 29-4 Aaron.Guido@matthews.com