Q2 2012 San Francisco, California Apartment Submarket Trends

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Q2 2012 San Francisco, California Apartment Submarket Trends

The City of San Francisco housing market features high rents in the center of the peninsula, with very high rents on the ocean side and very, very high rents on the bay side. Affluent Marin County is located over the Golden Gate Bridge from the City of San Francisco. San Mateo County is the portion of this market area closest to San Jose, Santa Clara County and the Silicon Valley to the south.

San Francisco

  • The 15,771-unit Civic Center/Downtown submarket has a second quarter 2012 vacancy rate of 4.0%, tied for second highest among 11 submarkets. The average asking rent of $1,569 per month is the second lowest among the submarkets according to Reis, and the lowest in the City of San Francisco.
  • The vacancy rate was unchanged in the second quarter but is down 20 basis points from a year earlier. The average asking rent increased 0.9% and the average effective rent rose 1.1% to $1,557 per month during the quarter. The year-over-year gains are 5.1% and 6.0%, respectively.
  • Reis predicts 1,231 units will be added here in 2013 and 2014. In January 2013, the 417-unit second phase of Trinity Plaza is projected to complete construction. The 750-unit Crescent Heights broke ground in January 2012 for completion in 2014.
  • In the 9,787-unit Russian Hill/Embarcadero submarket, the vacancy rate is 2.4%, and the average asking rent is $2,688 per month, the highest in the West Bay area according to Reis.
  • The vacancy rate fell 10 basis points during the second quarter and is down 110 from a year earlier. Rents are spiking. The average asking rent was up 2.3% during the quarter, with the average effective rent increasing 2.5% to $2,578 per month. The asking and effective averages are up 9.9% and 11.6% from a year earlier.
  • For the 12,778-unit Haight Ashbury/Western Addition submarket, Reis reports a vacancy rate of 3.3% and an average asking rent of $2,091 per month.
  • The vacancy rate was unchanged during the second quarter, and is down 80 basis points year-over-year. The average asking rent increased 1.1%, while the average effective rent rose 1.4% to $2,007 per month. The year-over-year gains are 6.8% and 7.9%, respectively.
  • Reis predicts 778 units will be added here from 2013 to 2016. The 113-unit building at 1844 Market Street broke ground in June for completion in August 2013. Two condominium projects have also broken ground in this submarket recently: the 115-unit Market & Buchanan started construction in June and the 61-unit 300 Ivy in August.
  • In the 8,084-unit Marina/Pacific Heights submarket, the second quarter vacancy rate is reported by Reis at 2.2%, the lowest in San Francisco proper, with an average asking rent at $2,319 per month.
  • The vacancy rate edged up 10 basis points during the second quarter, but it is down 60 from a year earlier. In the second quarter the average asking rent increased 1.0% and the average effective rent rose 1.2% to $2,296 per month. Rents are up 6.7% and 7.0% from a year earlier.
  • Reis reports the 15,512-unit South of Market (SoMa) submarket has a vacancy rate of 3.8% and an average asking rent of $2,449 per month, the second highest market-wide.
  • The vacancy rate fell 20 basis points in the second quarter, and is also down 20 from a year earlier. The average asking rent increased 1.2% during the quarter, with the average effective rent up 1.4% to $2,338 per month. The year-over-year increases are relatively moderate at 2.1% and 2.6%, respectively.
  • This submarket, as delineated by Reis, includes all the former industrial and low-income and working-class neighborhoods in the southeastern quadrant of San Francisco, as well as South of Market proper on its northern boundary. It is in this submarket that most of the new multifamily development is taking place, with Reis predicting 1,815 apartments to be added from 2012 to 2016.
  • Two more apartment projects broke ground in the second quarter: the 141-unit 25 Eighty on El Camino Real and the 280-unit 900 Folsom at that address. South of Market is also prominent in West Bay condominium construction, as three projects with 134 units have completed construction since the start of the year. The 299-unit second phase of One Rincon Hill broke ground in July.
  • “A majority of the projects in planning stages are located in the South of Market subregion, due primarily to the strong demand outlook stemming from tech employment,” according to Marcus & Millichap. This rezoned former industrial area targeted for redevelopment also has available sites. “Currently, more than 3,600 units are planned for the area, which would amount to a 23.0% increase to inventory. One of the largest complexes in the pipeline is the Daggett Place development, totaling 467 market-rate units.”
  • The 19,441-unit West San Francisco submarket has a vacancy rate of 4.7%, highest among the submarkets, and an average asking rent of $2,053 per month, according to Reis.
  • The 173-unit 1150 Ocean Avenue completed construction in May 2012 according to Reis, but 107 units of net absorption limited the vacancy rate increase to 30 basis points. The average asking rent rose 2.3% during the quarter, and the average effective rent increased 2.4% to $1,914 per month. The asking and effective averages are up 5.6% and 6.5% from a year earlier.
  • For all of San Francisco County, Cassidy Turley reports a vacancy rate of 3.6% and an average rental rate of $2,670 per month for properties with 99 or fewer units. For properties with 100 or more units, this source reports a vacancy rate of 4.6% and an average rental rate of $2,723 per month.
  • This source reports an increase in vacancy for San Francisco County in the second quarter. “Last quarter’s vacancy level was the lowest that we have ever tracked and reflected a level of occupancy that is simply unsustainable,” according to Cassidy Turley. “Typically, even in the tightest of markets you will rarely see vacancy levels fall below the 2.0% mark.”

Marin County

  • The 8,299-unit North Marin submarket has a vacancy rate of just 1.2%, tied for lowest among the submarkets, and an average asking rent of $1,538 per month, also the lowest according to Reis.
  • The vacancy rate fell 20 basis points during the quarter and is down 110 from a year earlier. The average asking rent was up 0.8% for the quarter, while the average effective rent increased 1.1% to $1,509 per month. The year-over-year increases are 3.9% asking and 4.9% effective.
  • The 82-unit 33 North completed construction in San Rafael in April.
  • In the 7,072-unit South Marin submarket, the second quarter vacancy rate is 2.6%, and the average asking rent is $1,812 per month.
  • The vacancy rate is down 20 basis points over three months and 60 year-over-year. The average asking rent rose 2.0% and the average effective rent increased 2.3% to $1,806 per month. Rents are up 3.4% and 4.0%, respectively, year-over-year.
  • Cassidy Turley has decided to start presenting North Bay apartment data in separate reports, rather than including them in their Bay Area multifamily report. “There is a simple reason for this. Though the North Bay markets lie in close geographic proximity, the trends there are quite different than those that impact the rest of the Bay Area’s apartment market.”
  • Currently, according to this source, “while most of the counties within the North Bay marketplace report low vacancy levels, current rental growth in most is not on par with the rest of the Bay Area.” So people priced out of San Francisco are not moving there and bidding up rents. The development boom in the rest of the Bay Area is also not observed in the North Bay according to this source.
  • “Limited inventory and close proximity to downtown San Francisco have made the South Marin area a prime rental market,” according to Marcus & Millichap. “With the lowest vacancy in the metro area, operators will likely become more aggressive with rent hikes, especially as the local construction pipeline remains narrow.”

San Mateo County

  • The 14,294-unit North San Mateo submarket has a vacancy rate of 3.7% and an average asking rent of $1,722 per month, Reis reports.
  • The vacancy rate was unchanged during the second quarter here and is down 80 basis points from a year earlier. The average asking rent increased 1.2% during the quarter and the average effective rent was up 1.4% to $1,659 per month. The year-over-year gains were 5.3% and 6.0%, respectively.
  • In the 14,466-unit Central San Mateo submarket, the second quarter vacancy rate is reported by Reis at 1.2%, tied for lowest among the submarkets, with the average asking rent given at $1,953 per month, highest in the suburbs.
  • The vacancy rate was down 20 basis points during the quarter and 160 from a year earlier, the largest year-over-year decrease among the submarkets. The average asking rent rose 2.0% during the quarter, with the average effective rent up 2.3% to $1,893 per month. The year-over-year gains are 6.2% and 7.3%, respectively.
  • The 307-unit The Plaza at Triton Park in Foster City is due to complete construction in October.
  • For the 10,639-unit South San Mateo submarket, Reis reports a vacancy rate of 1.9% and an average asking rent of $1,704 per month.
  • The vacancy rate fell 10 basis points during the quarter, as the average asking rent edged up 1.4% and the average effective rent rose 1.6% to $1,654 per month. The vacancy rate is down 80 basis points from a year earlier, with the asking and effective averages up 4.3% and 5.3%, respectively.
  • For all of San Mateo County, Cassidy Turley reports a vacancy rate of 1.9% and an average rental rate of $1,662 per month in properties with 99 or fewer units, and a vacancy rate of 4.7% and an average rental rate of $2,173 per month in properties with 100 or more units.
  • “All of the Bay Area’s local regions are reporting extremely low vacancy rates, but San Mateo County leads the way with just 1.9% vacancy,” according to this source citing data for smaller properties. For larger properties San Mateo’s vacancy rate is the highest.
  • “As Facebook expands its footprint in Menlo Park, the South San Mateo submarket will be the beneficiary of spillover apartment demand,” Marcus & Millichap expects. “The submarket has dropped 80 basis points in the last year, and is consistently one of the tightest rental markets in the area with vacancy near 2.0%.”