August 3, 2016
The Bay Area’s rental apartment market is booming. Vacancies throughout the greater Bay Area are highest in San Jose, at 3.7 percent. That’s almost a full percentage point lower than the national average. The availability of units in the East and North Bay markets is even lower, at 2.3 percent.
Not surprisingly, apartment rents have trended strongly upward in the last few years, as a result. Average rents are highest in San Francisco ($3,458) which trails only New York in terms of average rental cost. Yet, while rents have flattened recently, the cost of renting anywhere in the Bay Area is bound to remain high.
Why? Demand for housing is seriously outpacing supply.
According to data contained in JLL’s Mid Year 2016 Bay Area Multifamily Trends Report, household formation in the Bay Area outpaced housing development by 10-1 between 2010-2015.
Developers are building apartments. In fact, construction this year is at its highest level in more than a decade. More than 18,000 units are currently underway throughout the Bay Area, with the lion’s share (13,696) to be delivered in Silicon Valley. But that may still not be enough to meet demand. The bay Area is expected to expand population faster than any other region in the state between now and 2020. Last year, an average of 126 people moved into the Bay Area every day and the area accounted for more than half of all net residents to California.
Construction accidents such as the fire that consumed and destroyed a 105-unit apartment complex being built in Emeryville (in July) and public appeals placed on some proposed projects in cities like Oakland and San Francisco mean that developers will face delays delivering units this year and into 2017. This means that even with record construction, demand for rentals is likely to outstrip supply for the foreseeable future.