Sperry Van Ness International Corporation’s (SVNIC) 2015 Market Update Reports assess the current state of the national commercial real estate market, and identify micro-trends within specific geographic regions and industries for 2015. Today we are delving into the 2015 Top Multifamily Markets to Watch. Not the largest or the most actively contested markets, the 2015 Multifamily Markets to Watch are each at an important juncture that presents unique opportunities for investment. Together, they reflect the diversity of trends that is driving the economy and commercial real estate performance in markets across the country.
Top Multifamily Market to Watch: Oakland, CA
The rapid gentrification of some of San Francisco’s most iconic and hitherto relatively affordable neighborhoods has forced many recently priced-out residents to look eastward across the Bay to Oakland. They are not alone, but instead have been joined by some investors who are skeptical of San Francisco’s record low cap rates.
By late 2014, surging demand for apartments pushed rent growth in Oakland to nearly 7.0%, according to Chandan Economics’ tracking of mortgage-financed properties. Supporting continued increases, Freddie Mac projects Oakland’s multifamily vacancy rate will hover just above 3.0% in 2015, barely higher than San Francisco. Developers are working to meet demand. The Temescal/Telegraph neighborhood is seeing a flurry of development activity as investors bet that this area can compete with Berkeley’s Gourmet Ghetto and attract young renters. Deliveries will peak in 2016, relieving some of the upward pressure on rents.
Relocations from San Francisco are not the only drivers of multifamily performance in Oakland. The local economy is strong, supporting local demand that is independent of the Bay Area’s market interplay. The employment picture in the Oakland area has brightened considerably: the unemployment rate peaked at 16.5% in 2009, above the state-wide number, but has since declined to 5.9%, below California’s current 6.5% rate.
To read more on Oakland and other top multifamily markets, download the full version of the 2015 Multifamily Market Update.
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