New biannual regional multifamily market report provides comprehensive analysis and outlook on seven markets, 15 counties and nearly 878,000 multifamily units
"The current pandemic has impacted the region's strong apartment market fundamentals," said Regional Research Director, Douglas Garcia. "During these uncertain times, we hope to bring some clarity to our clients and stakeholders as they evaluate market conditions across Northern California."
The report's regional overview notes the regional occupancy rate declined 70 basis points quarter-over-quarter to 95.6 percent by the end of the second quarter. Regional effective rents decreased by 1.3 percent from the first quarter. Market uncertainty and falling rent collections have halted sales activity across the entire region with sales volume down 50 percent in the second quarter of 2020 compared to the same quarter in 2019. Sales volume will likely remain subdued through the end of 2020 with sales activity returning to pre-pandemic levels by the end of 2021.
In San Francisco, rents dropped 4.1 percent year-over-year. Occupancy decreased 250 basis points from Q2 2019. San Francisco registered -2,065 units in annual demand (units absorbed) over the last 12 months, while 1,737 units delivered during the same time period. A similar story played out in the San Francisco Peninsula market, where rents declined 3.7 percent over the last year and the occupancy rate declined 90 basis points to 94.9 percent. Sales volume was down dramatically in the second quarter in both San Francisco County and San Mateo County.
Although Silicon Valley's multifamily market remained resilient through the first half of 2020, rents declined 4.1 percent year-over-year and market occupancy declined 100 basis points as Santa Clara County grapples with a tech workforce that no longer needs to live near where they work. In the East Bay, rents dropped less dramatically but are still down 2.6 percent from Q2 2019. The North Bay was the only Bay Area market to report an annual rent increase – up 0.4 percent year-over-year. The North Bay also recorded the lowest occupancy drop in the Bay Area, declining 70 basis points to 95.6 percent by mid-year 2020.
The Sacramento market, on the other hand, recorded steady rents and an occupancy rate increase in Q2 2020. Demand will be tested across Sacramento, however, as landlords of newly delivered properties provide significant concessions to lease up their properties and more than 2,500 units are projected to deliver across the market in 2020. Stockton/Modesto boasts the highest occupancy rate of all Northern California markets at 97.8 percent. The market also posted the highest rent increase at 5.8 percent. As renter preferences shift to less dense and urban neighborhoods, more suburban and rural markets like Sacramento, Stockton/Modesto, and the North Bay stand to benefit and could recover faster than the more urban Bay Area markets.
Please contact Bob Shanahan or any of the managing directors or research managers listed at the end of the full report with questions. To download the report, click here.
About Colliers International
Colliers International (NASDAQ, TSX: CIGI) is a leading real estate professional services and investment management company. With operations in 68 countries, our more than 15,000 enterprising professionals work collaboratively to provide expert advice to maximize the value of property for real estate occupiers, owners and investors. For more than 25 years, our experienced leadership, owning approximately 40% of our equity, has delivered compound annual investment returns of almost 20% for shareholders. In 2019, corporate revenues were more than $3.0 billion ($3.5 billion including affiliates), with $33 billion of assets under management in our investment management segment. Learn more about how we accelerate success at corporate.colliers.com, @Colliers on Twitter or LinkedIn.
Colliers International | Sacramento