MARKETBEAT

Multi-Family Snapshot Q1 2016

Bay Area

BAY AREA MULTI-FAMILY Bay Area Apartment Market Letting Off

Economics Indicators the Accelerator
12-Month
Q1 15 Q1 16
Forecast  The Bay Area employed approximately 3.93 million
Bay Area Employment 3.851M 3.930M residents at the close of Q1 2016, roughly 80,000 more
Bay Area Unemployment 4.3% 3.9%
than a year ago.
U.S. Unemployment 5.4% 4.9%
 The unemployment rate in the Bay Area is currently at
3.9%, 40 basis points lower than the previous year and
Market Indicators the lowest level in over 10 years.
12-Month
Q1 15 Q1 16
Forecast  Apartment communities in the Bay Area ended Q1 2016
Overall Vacancy 3.6% 4.2% with a total market vacancy of 4.2% compared 3.6% in
Average Asking Rent $2,317 $2,482 the previous year. New construction has been the biggest
Total Sales Volume $1,212M $1,414M contributor to the increase in vacancy.
Average Cap Rate 4.53% 4.37%
 The average rental rate across all unit types was $2,482,
an increase of 7.1% from a year ago and 37.9% since the
Vacancy & Average Asking Rate*
beginning of the current real estate cycle in 2012. The
6.5% $2,600 rate of increase, however, is decelerating from the recent
6.0% $2,400
double-digit annual increase.
5.5% $2,200

5.0% $2,000
 San Francisco County is the most expensive apartment
4.5% $1,800

4.0% $1,600
market in the region and rivals Manhattan as the priciest
3.5% $1,400 market in the U.S. The average rent in the City is now
3.0% $1,200 $3,620 compared to $2,727 at the start of the recovery
2.5% $1,000
cycle.
2.0% $800
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Vacancy Avg Rent  Of the 576,000 existing apartment units in the Bay Area,
the East Bay is the largest market with over 2,900
Average Asking Rent by Unit Mix* communities totaling 192,000 units.
$3,600
studio
 Currently in the Bay Area, approximately 23,300 units are
1bd 1bth
$3,100
2bd 1bth under construction. San Francisco accounts for nearly
$2,600
2bd 2bth
8,000 units under construction followed by Santa Clara
3bd 2bth
County with roughly 7,800.
$2,100

$1,600  We are currently tracking over 300 projects in the Bay

Area at various stages in the planning and entitlement
$1,100
process that could potentially add another 82,700 units to
$600
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 the market.

*Annual Average

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 MARKETBEAT

Multi-Family Snapshot Q1 2016

Bay Area

 In the Bay Area, there were 165 apartment transactions Total Existing Units by Region
EAST BAY & SANTA CLARA ACCOUNT FOR 61% OF THE BAY AREA
totaling $1.41 billion in Q1 2016 compared to 225
transactions and $2.33 billion in the previous quarter
and 253 and $1.21 billion from a year ago. 9%

East Bay

 The total amount in units of apartment sales closed 13%

33%
Santa Clara County
during the quarter was roughly 6,300.
576,192 San Francisco County
Units
 The Bay Area capitalization (cap) rate ended the 17%
North Bay

quarter at 4.4%, some 10 basis points higher than the San Mateo County

previous quarter. The gross rent multiplier or GRM

28%
ended the quarter at 15.87 compared to 14.51 at the
close of 2015.

Q1 2016 Top Deal Profile

Historical Investment Dollar Volume & Cap Rate
Woodland Park Apartments (1,812 Units) in San CAP RATE COMPRESSION RESUMES
Mateo sold to Sand Hill Property Company from
Equity Residential for $413,000,000.
$3,500 7%

$3,000 Total Dollar Volume

 San Mateo County held the lowest cap rate of all Bay Average CAP
$2,500
Area markets at 3.8% while Sonoma County was at the 6%

other end of the spectrum at 7.1%. $2,000

$1,500

 The East Bay accounted for the most sale transactions $1,000
5%

in the Bay Area at 77 while San Mateo closed the

$500
quarter with the highest dollar volume at $475 million.
$0 4%
2011 2012 2013 2014 2015 2016

Investment by County in Q1 16 (Millions)

INVESTMENTS SURGE IN SAN MATEO AND EAST BAY OFFERINGS
Outlook
 Overall rental rates will level off as the recent round of new
San Mateo Co. $475.2
construction hits the market driving a greater degree of
competition with available units.
East Bay $463.7
 Vacancy will inch close to 5% in response to deliveries.
Tenants will flock to recently built communities with better Santa Clara Co. $321.2
onsite and local amenities with the exception of tenants
already enjoying the benefit of strong rent controlled markets
San Francisco Co. $86.8
(San Francisco, Oakland, Berkeley, and Richmond).
 Interest rates remain near historic lows but are expected to North Bay $67.1
increase later this year. Interest rate increases will likely lead
to an upward adjustment in capitalization rates.

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 MARKETBEAT

Multi-Family Snapshot Q1 2016

Bay Area

RENTAL STATISTICS TOTAL TOTAL UNITS AVERAGE AVERAGE

STUDIO 1BR / 1BA 2BR / 1BA 2BR / 2BA 3BR / 2BA
BY MARKET PROPERTIES UNITS U/C VACANCY RENT

Alameda County 2,193 130,979 2,910 3.1% $2,264 $1,795 $2,043 $2,191 $2,658 $2,998

Contra Costa County 728 61,340 619 3.7% $1,891 $1,511 $1,733 $1,764 $2,197 $2,100

East Bay 2,921 192,319 3,529 3.4% $2,121 $1,683 $1,926 $2,042 $2,450 $2,708

San Francisco County 1,611 98,597 7,944 4.8% $3,620 $2,862 $3,421 $3,709 $4,749 $4,645

San Mateo County 661 49,848 2,992 6.1% $2,851 $1,993 $2,590 $2,878 $3,407 $4,306

Santa Clara County 1,606 160,652 7,783 4.3% $2,610 $1,888 $2,361 $2,494 $2,961 $3,600

Marin County 250 14,175 180 4.2% $2,569 $1,692 $2,262 $2,352 $3,003 $3,836

Sonoma County 428 27,801 144 4.6% $1,746 $1,096 $1,539 $1,759 $2,004 $2,436

Napa County 102 7,535 148 4.0% $1,822 $925 $1,645 $1,702 $2,082 $2,272

Solano County 283 25,265 580 3.9% $1,499 $1,181 $1,383 $1,426 $1,685 $1,677

North Bay 1,063 74,776 1,052 4.2% $1,823 $1,319 $1,637 $1,708 $2,050 $2,604
TOTAL 7,862 576,192 23,300 4.2% $2,482 $2,137 $2,254 $2,239 $2,850 $3,300

Property statistics for communities 16 units and greater, rental statistics for communities 50 units and greater

INVESTMENT STATISTICS TOTAL SALES TOTAL PRICE/ PRICE/ CAP

GRM
BY MARKET PROPERTIES VOLUME UNITS UNIT SQ. FT. RATE

Alameda County 60 $296,367,602 1,520 $ 194,919 $214.79 4.4% 12.68

Contra Costa County 17 $167,291,172 974 $171,757 $178.51 5.3% 13.40

East Bay 77 $463,658,774 2,494 $185,910 $200.12 4.72% 12.94

San Francisco County 23 $86,810,767 325 $267,109 $276.48 4.1% 16.53

San Mateo County 23 $475,214,109 2,029 $234,211 $291.36 3.8% 21.13

Santa Clara County 22 $321,219,791 1,105 $290,696 $364.76 4.3% 15.34

Marin County 2 $5,970,298 20 $298,500 $417.50 4.6% NA

Sonoma County 9 $39,622,742 164 $241,601 $241.24 7.1% 10.98

Napa County 1 $2,585,258 10 $258,500 $215.44 4.0% NA

Solano County 8 $18,964,608 175 $108,369 $135.32 5.8% 9.09

North Bay 22 $321,219,791 1,105 $290,696 $364.76 4.3% 15.34

TOTAL 165 $1,414,046,347 6,322 $223,670 $258.35 4.4% 15.87
Property sales for communities 5 units and greater

Key Multi-Family Sale Transactions Q1 2016

PROPERTY UNITS BUYER SELLER SALE PRICE Sub-Market

Woodland Park Apartments 1,812 Sand Hill Property Company Equity Residential $413,00,000 San Mateo
Parc at Pruneyard 252 Land and Houses USA Rockpoint Group $100,000,000 Santa Clara
Mohr 1 Apartments 126 Related Affordable Housing Bayside Communities $81,000,000 Alameda
The Palms Apartment Homes 500 KF Partners Sequoia Equities $68,000,000 Sacramento
Sofi at Los Gatos Creek 116 Pacific Urban Residential Klingbeil Capital Management $56,000,000 Santa Clara
Village at Town Center 159 Klingbeil Capital Management Kennedy-Wilson Properties $55,000,000 Contra Costa
Mio Japantown 103 Essex Property Trust ROEM Development Corporation $51,000,000 Santa Clara
Stone Creek Apartments 368 Oaktree Capital Management Oakmont Properties $44,000,000 Sacramento
Oak Hills 148 BMW Clearbrook Circle, LLC Fowler Property Acquisitions $41,000,000 Alameda
Hidden Creek 168 Fairfield Residential Interstate Equities Corporation $38,000,000 Contra Costa

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 MARKETBEAT
Multi-Family Snapshot Q1 2016
Bay Area
Multi-Family Submarkets
Bay Area
Source: Cushman & Wakefield Research, CoStar Group, Real Answers
Cushman & Wakefield
425 Market Street, Suite 2300
San Francisco, CA 94105
For more information, contact:
Jason Karbelk
Research Analyst
Tel: +1 415 397 1700
jason.karbelk@cushwake.com
About Cushman & Wakefield
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www.cushmanwakefield.com or follow @CushWake on Twitter.
Copyright © 2016 Cushman & Wakefield. All rights reserved. The information contained within this report is gathered
from multiple sources considered to be reliable. The information may contain errors or omissions and is presented
without any warranty or representations as to its accuracy.
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