The San Francisco Bay Area multifamily market finished first half 2019 with strong rent growth, absorption and completions, according to Cushman & Wakefield.
The market absorbed nearly 2,700 units during the first six months of 2019. The Santa Clara (801 units) and Alameda (713 units) submarkets recorded the highest net gains in positive absorption.
The Bay Area vacancy rate remained at a low 3.9 percent, unchanged year-over-year (YOY). The San Mateo County figure recorded the largest YOY decrease from 4.5 percent to 4 percent, while San Francisco hit an 18-month low at 4.1 percent. These neighboring business hubs are actively keeping up with demand by picking up the pace of construction deliveries or approving entitlements.
Asking rent growth remained positive increasing to $2,768 per unit in the second quarter of 2019, 1.7 percent higher YOY, 3.5 percent over three years, and a staggering 82.7 percent since the Great Recession ended in 2009. The Bay Area’s recovery was most prominent in 2014–2015 when rents spiked from $2,000 to $2,600 per month due in large part to the exploding technology sector in conjunction with a wave of new units often equipped with higher-cost modern features and amenities — despite such wave, supply has still seemingly fallen short of market demand.
The East Bay, which consists of Alameda and Contra Costa counties, saw the largest asking rate increases of 4.8 percent YOY and 3.3 percent YOY, respectively. This region has been on the upswing with demand drivers such as new apartments along transportation lines, a growing professional workforce and exceptional retail concepts.
Sales volume has slowed from the boom of 2018’s quarterly average $1.3 billion as first half 2019 averaged $865 million per quarter. Cap rates are below the 10-year average of 5.1 percent. The Bay Area overall figure was 4.3 percent at the end of the second quarter, decreasing 40 basis points from the fourth quarter and down 10 basis points from one year ago.
Construction completions remained steady, bringing the first half 2019 total to just over 3,900 units across 27 properties. Cushman & Wakefield is currently tracking nearly 33,000 units under construction and an additional 104,000 units planned for development.
