Marcus & Millichap

Bay Area Multifamily Market Report

Bay Area Metro Area, Fourth Quarter 2017

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Incredibly Tight Labor Markets Encouraging Renter Demand; Peak Supply Coming Online

Lowest unemployment rate in nearly 20 years spurring housing demand; lack of single-family homes encourages renting. The robust demand for technology workers and other professional employment has pushed the broad region’s employment rate to a multidecade low, prompting surging demand for the limited housing stock that exists in the marketplace. Due to the high price of single-family homes, a continual flow of renters have kept rental demand elevated. In order to meet this demand, builders have pushed deliveries to the highest point in more than a decade. Although vacancy remains extremely depressed, the peak in deliveries in 2017 has begun to weigh on overall vacancy, particularly in the submarkets receiving the bulk of the injections. As a result, a modest uptick in vacancy is expected, while rent growth continues to reflect extremely tight conditions overall.

Sites in SoMa dominate elevated completions schedule. Following several years of moderate supply growth, 2017 represents the peak in new units, with more than 13,100 slated for delivery this year. More than 5,100 will come online in the fourth quarter, with nearly half of these units underway in the SoMa submarket. Elsewhere, construction remains widespread, reflecting the broad scope of development underway. Looking forward to 2018, completions will fall by more than 30 percent and will be evenly distributed between the three Bay Area metros.

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