Bay Area Rents Q2 2016

Having inched up by $4 a month in the first quarter of 2016, the average asking rent for an apartment in a building with over 50 units in San Francisco slipped by $25 a month (0.7 percent) to $3,595 in the second quarter of the year, while the asking rent for an apartment in an East Bay building ticked up by $48 a month (2.3 percent) to $2,169.

And with the lowest Bay Area vacancy rate of 3.1 percent, versus 4.9 percent in San Francisco (which ticked up from 4.8 percent the quarter before), asking rents were up $57 a month (2.5 percent) to $2,321 for an apartment in Alameda County, which includes Oakland.

In fact, San Francisco was the only Bay Area County to record a decline in average asking rent. And with 7,300 units of housing currently under construction in the city, including at least a thousand new apartments which will be ready for occupancy within the next couple of months, and gains in employment having stalled, the current outlook calls for the vacancy rate in San Francisco to continue to tick up and rents to either level off or (more likely) decline.

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Comments from “Plugged-In” Readers

  1. Posted by Hunter

    Why only buildings with >50 units? I’d like to know the numbers for buildings with >5 units, since the vast majority of our city is under 5 stories tall…

    • Posted by Notcom

      It says “communities 50 unites and greater”: I believe that refers so the size of the area they are in, not the building (i.e. it excludes rural areas)

      • Posted by SocketSite

        That’s incorrect. As we reported above, the stats are for buildings (“communities”) with 50 units or more and are based on a survey of institutional landlords.

        Averages based on listings for individual units are much more susceptible to changes in mix, and institutional landlords tend to move faster than mom and pop landlords with respect to pricing adjustments and managing vacancy rates.

        That being said, institutional landlords are also more likely to offer incentives than reduce asking rents in a decline, which magnifies the significance of a reported drop.

        • Posted by Notcom

          Oh well, in that case I stand corrected…and throw my support behind “Hunter”s sentiment: an index which excludes a large portion of the rental stock – how large ?? well that would be nice to know, too – seems deficient if it’s trying to draw attention to actual costs (as implied by its stating rates); it’s probably useful in tracking changes, assuming the whole supply moves in lock step, but again you would need the whole picture to know for sure… and you’re inference is they DON’T move that way.

          • Posted by SocketSite

            No, our implication is that institutional trends are leading, and more accurate, indicators of the market.

        • Posted by SocketSite

          And right on cue from Bloomberg this morning:

          “Apartment landlord AvalonBay Communities Inc. gave renters concessions worth $300,000 in the second quarter, four times more than in the same period a year earlier, as enticements to sign leases.

          The sweeteners, in the form of free months of rent, were greatest in New York, Northern California and New England, Chief Operating Officer Sean Breslin said on a call Tuesday to discuss earnings.”

          “Job growth in the markets where AvalonBay owns apartments [such as San Francisco] was also weaker than the company expected in the second quarter, damping demand for rentals in what is usually the busiest leasing period…”

  2. Posted by guest

    I’m hoping that the likely plateau-ing of rents and condo prices, plus additional supply, won’t cause developers to shelve projects that aren’t yet under construction. Surely developers can still make good money based on current rates and prices (or even 10-20% less) and weren’t hinging their plans on average 1bds to go to 4500/month or 2bds to go to 6000/month

    • Posted by Dave

      That’s the big question. Will projects not yet under construction be shelved or delayed?

      I think its more likely that delays will occur as opposed to outright shelving of projects. If, this is still to be determined, it gets to that point. The absorption rate of new units over the remainder of this year will most likely determine what happens next year.

      Keep in mind that a project does not have to be shelved if a developer does not want to build now. Usually, as far as I know, there is a 3 year window within which construction has to start or the permit is lost. That gives developers plenty of lag-time should there be a down cycle of several years.

      • Posted by anon

        I agree. SF is one of the country’s most expensive markets. It seems doubtful that building here only makes sense at the very top of a large boom.

        Plus during a bust, usually retail and office space get hit as well, making alternative land uses less attractive

        • Posted by SFRealist

          True in the long term, but we do saddle developers with lots and lots of costs (slow permitting process, appeals from anyone and everyone, etc). If they don’t have extremely deep pockets to see the process through, it’s easy to imagine them delaying a projects

  3. Posted by Michelle L

    Doesn’t San Francisco county include some other nearby cities?

    • Posted by 94116

      Nope. SF is a City and County onto itself.

  4. Posted by skflsndf

    I’d love to see the average rent paid in rent control units. Then show that side by side w/ the market rents.

    • Posted by Sabbie

      I’d like to see the average NOI of landlords with rent control units.

    • Posted by Anna Ng

      Yes, I’d like to see socketsite commission a survey on that. Then the headline can read ‘average rent in SF $1800’. ALL the headlines are really misleading when 50% (?) of the population in SF is paying very low rents.

    • Posted by JR "Bob" Dobbs

      And I’d like to see the average property tax rate, as a percentage of market value, that is paid on rent control buildings.

      • Posted by tt

        You can pull up the current and historical property tax amount for each house and easily graph this out against market rate house prices. The rent for rent controlled apartments is not public information.

    • Posted by Ohlone Californio

      yeah, that’s the thing that has been left out of most of the stories in the current news cycle. So many people in San Francisco are paying low rent by today’s standards. Drive around most parts of town and look at corner buildings. That is where a lot of the people paying sub market rents live. The fact that so many seem to feel as if this is anything besides lucky timing has always struck me as a little odd.

  5. Posted by Sabbie

    Check out 1719 LaSalle Ave. remodeled SFR in the Bayview. They listed it on the MLS. 03/2015 it was leased for $3,995/mo. Looks like the tenants moved out and 06/2016 it was rented for $3,700/mo.

  6. Posted by wc1e

    A friend has been looking for something to rent in SOMA. He found a few of the larger complexes are offering first month free rent.

  7. Posted by Sabbie

    The homeownership rate fell to 62.9%, half a percentage point lower than the Q2 2015 and 0.6 percentage point lower than the Q1 2016, the Census Bureau said on Thursday. That was the lowest figure since 1965. Let me say that again. 1965. With record low rates. That’s why rents are creeping up. Taking a bite out of already depressed wages in a consumer driven economy. But everything is great according to the speeches.

    • Posted by SFrentier

      I think that’s mainly because young people are still coming into SF at higher rates than those leaving. And almost all the new peeps rent. Hence relative ownership rate slips.

      • Posted by anon

        I assume that he’s talking US home ownership rate. SF’s rate is nowhere near 63%

      • Posted by Sabbie

        Yes this is nationwide, SF nowhere close.

      • Posted by kbbl

        CNBC [namelink] matches my intuition that the millennials that were living with relatives might now be moving into rentals of their own, dropping the rate not unlike the unemployment rising as folks optimistically reenter the labor force. I don’t get why “things were horrible but are much less horrible today” is such a hard idea to absorb.

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