Last week real estate-research firm Reis Inc. released its mid-year report on the apartment market stating that U.S. landlords had increased rents 0.7% to $1,062 in the second quarter, yet there are signs that the nationwide surge of apartment occupancy and rental rate increases is tapering off compared with a year ago, as reported by the Wall Street Journal.
Apartment rents increased 1.3% during the second quarter of 2012, according to New York-based Reis Inc. The national vacancy rate held steady at 4.3% in the second quarter this year.
The difference may be attributed to the new supply coming to the market — this is certainly the case in the San Francisco Bay Area. Nationwide, multifamily developers are adding approximately 160,000 new apartment homes in the top 54 U.S. Metro markets this year, according to CoStar Group, and as many as 350,000 new apartments could be delivered by 2015, CoStar forecasts.
Meanwhile, Bay Area rent increases slowed a bit in late 2012 then jumped 6% to 8% in the first quarter this year, according to Novato-based RealFacts, which supplies data and analysis to the multifamily industry.
“Increase demand for home sales, combined with a significant amount of new supply in core submarkets of our region could slow rental growth in Northern California but so far we have not seen it,” said Woodmont Real Estate Services Executive Vice President & Partner Jeff Bosshard, CPM®.
“For example,” Bosshard continued, “in May the nominal rent low for a one-bedroom apartment home in one of the San Francisco Peninsula apartment communities we manage was $1,948 while the high was $2,243. The low for a two-bedroom-two bath was $2,509 and the high was $2,959. On average, the rents are between 8%-9% higher than a year ago. In one of our South Bay communities, rent increases range from 3%-12%, depending on the floor plan while asking rents at a South San Francisco apartment community we manage are up 13%-15% over a year ago, and we are not planning to lower rents anytime soon,” he said.
The situation is more dynamic in the city of San Francisco — with all of its pending new supply — than anyplace else in Northern California, where Woodmont provides property management and related services for multifamily property owners and investors that collectively own more than 11,000 apartments, said Bosshard.
Indeed, a recent San Francisco Business Times article stated that nearly 8,000 new apartments – mostly mid-rise and high-rise buildings, will come online between this summer and 2015, when 3,498 apartments are forecast to be delivered in that year alone. The Business Times cited local condominium sales and marketing company Polaris Pacific when it published the comparison – that San Francisco developers built (only) an average of 220 new rental apartments a year between 2000 and 2012.