
Before the devastating Palisades Fire, the West County multifamily submarket in Los Angeles was performing exceptionally well. With roughly 2,500 units, this area boasted minimal vacancies and steady rent growth, reflecting strong demand for rental properties. However, in the wake of the recent fire—which destroyed thousands of structures and left entire neighborhoods in ruins—market dynamics have shifted dramatically.
Market Snapshot Before the Fire
Vacancy Rates:
Hovered around 2.2%, well below both the five-year (2.4%) and ten-year (2.9%) averages.
Historically low vacancies were driven by strong demand and limited new construction.
Rents:
Averaged around $3,330/month, significantly higher than the Los Angeles metro average of $2,300/month.
Year-over-year rent growth stood at 4.9%, outpacing the long-term average of 3.1% (five-year) and 3.6% (ten-year).
New Construction:
No new multifamily developments were underway at the start of 2025, diverging from the decade-long average of 30 units per year.
Low levels of new supply pointed to continued upward pressure on rents.
Insurance Challenges (Pre-Fire):
Developers were already struggling to secure affordable coverage due to wildfire risks in the Los Angeles area.
Insurance premiums for existing properties had been rising steadily, reflecting growing concern among insurers about wildfire exposure.
Post-Fire Realities
Demand Fluctuations:
Despite the region’s historically tight housing market, the Palisades Fire’s widespread damage has introduced uncertainty. In the short term, some displaced residents need housing immediately, which could bolster demand.
However, ongoing safety concerns and the heightened cost of living (including rising insurance expenses) may lead to a significant decrease in long-term demand if potential residents choose less fire-prone areas or delay moving altogether.
Insurance Costs and Availability:
The fire has intensified an already challenging insurance market. Coverage is becoming harder to obtain and prohibitively expensive for both existing properties and any new construction.
Skyrocketing premiums could deter investors, stall redevelopment, and place pressure on property owners to pass costs onto tenants—further dampening demand.
Recovery and Rebuilding:
Rebuilding efforts face delays due to a combination of permitting hurdles, limited contractor availability, and persistent insurance complications.
These challenges may prolong the area’s recovery, curb new construction, and keep vacancy rates volatile in the near term.
Conclusion
Before the Palisades Fire, West County’s multifamily market was robust: vacancies were minimal, rents were rising, and new construction was limited. Today, the fire’s aftermath has upended many of those dynamics. While short-term needs may temporarily elevate demand, the heightened threat of wildfires—and the ensuing spike in insurance costs—could drive a noticeable decrease in overall demand for multifamily properties. In this environment, developers and property owners alike must navigate skyrocketing insurance premiums and new regulatory obstacles, which will shape market conditions for years to come.
January 12, 2025 by Michal Mohelsky, J.D: principal of MMCG Invest, LLC Multifamily feasibility study consultant
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