The stabilization period is the time between a property's delivery (or renovation completion) and when it reaches normal operating occupancy and income. Typically 6–24 months in LA multifamily.
During stabilization, a property lease-up progresses from zero or low occupancy toward the submarket norm (94%+). Rents get set, tenant base gets established, operating expenses stabilize. Financing for stabilization periods is typically bridge debt; permanent financing underwrites the stabilized NOI.
New construction multifamily in LA often has 12–18 month stabilization periods given the concession burn-off and tenant acquisition cost. Acquired value-add deals can have shorter or longer stabilization depending on scope. Buyers of unstabilized assets pay different cap rates than buyers of stabilized.
From the Sterman LA Multifamily Glossary — defined the way a broker with $1.41 billion across 254 closed transactions actually uses these terms.
Michael Sterman, Senior Managing Director Investments, Marcus & Millichap.
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