4Q 16 Multifamily Report
4Q 16 Multifamily Market Report Rent Increases Slowly But Still On The Rise The market for multifamily real estate in has exceeded pre-recession highs since the beginning of 213. Steady job growth and mortgage restrictions have created a demand far above the supply of multifamily units; this has led to tight occupancy and increases in rents. Investors see potential for continued appreciation of multifamily, which brings plenty of investors despite lower capitalization rates in San Francisco. Effective rents have been continually on the rise. In, median price per square foot increase to an all-time high of $495.17. county had an increase in employment this quarter compared to the fourth quarter of 215, and unemployment has declined from 3.5% to 3.%, this is 18 basis points below the national average. Unemployment in the San Francisco Peninsula dropped from 3.1% to 3.%, a 1 basis point decrease, since the third quarter of 215, which is 18 basis points below the national unemployment rate. In and county, vacancy had an increase with effective rents, but effective rent increased has slowed compared to previous years. With these increases, had reached a 5-year low in construction starts. The Bay Area market has seen a slowing on throttle for increases in effective rent and construction starts. Average Price Per Unit $6 $5 $4 $3 $2 $1
Effective Rent $3, $2,5 Effective Rent The and multifam- $2, ily housing markets had an increase in effective $1,5 rents of only 1.91% in the last year; the effective $1, rent per unit in the and San Ma- $5 teo counties was $2,619. This rent is much higher than the effective rent in the East Bay being $1,793. county had an increase in effective rents, but buildings built pre-2 had a decrease in effective rents; concessions have increase to.67%. 6% 5% In SaIn 216, and 4% county both experienced an increase in vacancy. 3% county vacancy increased from 2% 3.7% to 4.2%, this is a 1-year high in vacancy, 1% with a small increase in effective rent. Also, San Mateo county vacancy increased from 4.% to 5.%. Even though vacancy increased, oc- cupancy increased, this would mean inventory increases had an impact on vacancy. Developments for 216 that caused this increase in vacancy and occupancy are 299 Fremont St. in, 34 Fremont St. in, 81 Arnold Way in Half Moon Bay, and 777 Hamilton Ave. in Menlo Park.
Construction 1 8 Multifamily Construction and counties had 3,854 units delivered in 216 and 2,85 units delivered in 215; this market had 7,341 units under construction at the end of 216. With 3,854 units delivered, this is a new peak of annual completed in the market. Construction starts fell to a 5-year low, with only 1,89 units started in 216, compared to 5,149 units started in 215. In 216, the market had 17 properties of 1+ units completed. The largest completions include: 525 Middlefield Rd. in Redwood City and 11 16th St in. 525 Middlefield Rd. is a 463-unit property with 3 1-bedroom units and an average unit size of 842 square feet. 11 16th St is a 454-unit property with two six-story buildings and commercial space. 6 4 2 Starts Deliveries Under Construction Cap Rate & GRM 5 4 Cap Rates In, average capitalization rates con- 3 tinue to decrease, reaching 3.61% in the fourth quarter of 216, this is a 5-year low for capitalization rates. Median price per square foot continued 2 1 to rise with the decrease in capitalization rates. Average gross rent multipliers have trended up with average capitalization rates. Although, aver- age capitalization rates increased, the change was much smaller than previous years and shows the 25 GRM trend of slowing down. county had similar trends in average capitalization rate and gross 2 rent multiplier compared to. 15 1 5
Multifamily 4Q 16 Trends for CAP RATE VACANCY CONSTRUCTION EFFECTIVE RENT 216 Market Overview: Submarket Name Inventory Units Effective Rent (%) Absorption Under Const. Deliveries Sunset/Park Merced 1,16 $2,658 3.9% 31 56 - Mission/Castro 18,95 $2,268 3.7% 1 137 4 Civic Center/ Tenderloin 11,776 $2,64 3.% (3) - - Richmond Fillmore 2,227 $2,242 4.5% (74) 79 - Southeast 4,819 $1,997 8.1% 75 732 - North Beach 15,478 $2,633 3.7% (19) - - Pacific Heights/Marina 13,666 $3,462 4.% (24) - 21 Mission Bay/ Dogpatch 6,278 $3,589 3.5% 5 1846 - SoMa 1,966 $3,53 6.8% 319 1677 - Downtown 9,151 $2,613 3.5% - 13 - Significant Sales Transactions: Address Price Price Per (Unit) Units Submarket 781 Broadway $53,447,915 $275,54 194 North Beach 938 Ellsworth St $5,8, $34,926 164 Mission 145 Guerrero St $46,442, $422,2 11 Mission 4 Harbor Rd $42,57,1 $19,897 223 Southeast 32 Clementina St $4,725, $121,25 336 SoMa 1251 Turk St $32,925, $166,287 198 Fillmore 221 Pacific Ave $31,8, $836,842 38 Pacific Heights 1755 Van Ness Ave $29,85, $597, 5 Pacific Heights 251 Sutter St $24,77, $182,183 136 Fillmore
Multifamily 4Q 16 Trends for CAP RATE VACANCY CONSTRUCTION EFFECTIVE RENT 216 Market Overview: Submarket Name Inventory Units Effective Rent (%) Absorption Under Const. Deliveries Pacifica 2,896 $2,473 3.6% - - - S / San Bruno/ Millbrae 8,579 $2,57 3.4% (34) 83 - Foster City/Redwood Shores 5,78 $2,897 5.5% 2 22 - Outlying County 785 $1,16 15.8% - - - Daly City/Brisbane 7,617 $2,23 5.3% (3) - - Redwood City/Menlo Park 15,819- $2,444 5.7% 15 1,348 14 /Burlingame 2,235 $2,49 4.8% (42) 1,6 5 Significant Sales Transactions: Address Price Price Per (Unit) Units Submarket 781 Broadway $73,15, $375,128 195 Belmont 938 Elssworth St $46,5, $344,444 135 145 Guerrero St $26,, $371,429 7 4 Harbor Rd $17,15, $311,818 55 Redwood City 32 Clementina St $9,45, $525, 18 Redwood City 1251 Turk St $8,55, $78,75 12 Menlo Park 221 Pacific Ave $8,3, $415, 2 1755 Van Ness Ave $7,, $411,765 17 Redwood City 251 Sutter St $6,5, $65, 1 Menlo Park
4Q 16 Multifamily Market Report For inquiries about joining our team contact President James Kilpatrick. James Kilpatrick President BRE Lic No: 127722 (415) 449-8784 Angelo Baglieri Investment Advisor BRE Lic No: 1996324 (415) 463-134 Alex Barker Senior Leasing & Investment Advisor BRE Lic No: 1961924 (415) 48 29 Jordan Geller Vice President BRE Lic No: 1919128 (415) 727-97 Jake Delgadillo Senior Researcher (51) 336-4716 Kent Mitchell Vice President BRE Lic No: 1784628 (51) 548-2554 Joby Tapia Senior Investment Sales Advisor BRE Lic No: 13746 (415) 329-4623 Evan Yeh Investment Advisor BRE Lic No: 195969 (415) 93-412 Kyle Hoopes Investment Advisor BRE Lic No: 199774 (415) 347-859 11 California Suite 85, CA USA 94111 +1 415 481 984 nainorcal.com