Multifamily Market Overview
Pasadena, CA
Pasadena has seen strong tenant demand in recent quarters. Sales activity has been strong because of three major acquisitions made by the California Statewide Communities Development Authority (CSCDA) and Waterford Property Company in order to convert communities into middle-income housing. Pasadena houses multiple research institutions and tech incubators, including the California Institute of Technology, NASA’s Jet Propulsion Laboratory, Huntington Medical Research Institute, and Idealab. Additionally, the expansion of Pasadena’s tech sector has been attributed to an increase in large high-end multifamily development.
Vacancy
The current apartment vacancy rate in Pasadena is 2.5 percent, a significant drop from 4.9 percent during the pandemic in 2020. Recently, the completion of AMLI Old Pasadena has resulted in vacancies increasing in the four- and five-star apartment sector, which is at 6.1 percent vacancy.
Rent
The average rent is $2,984 per unit, with the average size at 860 square feet. In the past 12 months, asking rents increased by 6.2 percent in comparison to gains of 6.0percent across the Greater Los Angeles market. Pasadena is anticipated to continue its rent gains, at least for the near future. Overall, the market has seen an average annual rent growth of 3.3 percent over the past five years.
Construction
Pasadena has approximately 27,000 market-rate apartment units, with about 70 percent being in one- and two-star markets. In the last decade, the construction of high-end projects has increased astronomically, significantly expanding the inventory of luxury apartment buildings. Currently, there are 360 units in the pipeline, including MW Lofts, Pasadena’s largest apartment complex that will feature 115 units in the city’s Playhouse District. Also in the pipeline is as a one million square foot urban village, 100 West Walnut, comprising new office, retail, and apartment units. Additionally, the recent completion of 394-unit AMLI Old Pasadena has continued the momentum of multifamily building development. Pasadena’s Playhouse District and Downtown are attracting a large sum of investors, as the area attracts new residents because of its walkability, high-end retail, dining options, and access to the L.A. Metro.
Sales
The average price per unit in Pasadena ranges between $340,000 to $380,000 per unit, with an average cap rate at 3.8 percent. In the past 12 months, investment activity has been strong, bringing in $281M in sales volume, well-above the 10-year average of $244M. Recent development in Pasadena has been completed by public and private partnerships to convert apartment buildings into communities restrictive to middle-income renters, those making 60 to 120 percent of median area income. Large scale sales have included the California Statewide Communities Development Authority (CSCDA) partnered with Waterford Property Company to purchase Westgate Apartments in Old Town Pasadena for $280 million. In terms of moderate sales, the 12-unit 1314 E Orange Grove Ave building sold for $4M at a 3.19 in-place cap rate.
Conclusion
Pasadena’s multifamily market has been heavily driven by partnerships to create middle-income housing. Additionally, the rise of the tech industry has created demand for luxury apartment buildings in Downtown Pasadena and its Playhouse District.
