Following a dip in April, apartment rents in California’s East Bay rebounded in May, returning to positive growth. This increase coincides with the end of the K-12 academic year, a period when families often settle their housing plans for the upcoming school year.
Key Market Highlights:
Rent Growth: The area experienced a rise in rents by 10 basis points in May. Since the start of the year, the cumulative rent increase has reached 50 basis points.
Net Absorption: Over the last three quarters, the number of units filled has outstripped the number of units vacated, surpassing the volume of new units introduced.
Vacancy Rate: The vacancy rate in the multifamily sector is currently at 6.8%, a reduction of 70 basis points from its highest level in the fourth quarter of 2022. Nonetheless, it is still higher than the long-term average of 4.9%, primarily due to new units entering the market rather than extended periods of more vacancies than occupancies.
Construction and Supply:
Ongoing Projects: Despite an excess in supply, over 4,200 units are under construction. However, new construction has slowed significantly. This reduced pace of new projects is anticipated to gradually lower the vacancy rate as ongoing developments are leased out and fewer new units are introduced to the market.
Market Segment Trends:
Luxury Properties: Rent prices for top-tier properties continue to fall, showing a year-over-year reduction of over 350 basis points. Landlords in this segment are frequently offering incentives, such as up to two months of free rent on 15-month leases. As vacancy rates approach the long-term norm, the value of these incentives is expected to decrease in upcoming months.
While rent increases in the East Bay are modest, significant spikes are not expected in the near future. CoStar forecasts that net absorption might slightly exceed new unit completions in the upcoming quarters, potentially easing competition among properties for a finite pool of renters.
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Source: CoStar
