The Bay Area’s largest metros have had the highest multifamily rent growth since the beginning of the cycle compared to all other U.S. metros. Data from RealPage indicates San Jose’s rents jumped the most, increasing 52.4% since 2010. Oakland’s rents grew 51.1% and San Francisco’s rents are up 48.6% in the same time period.
Four other West Coast metros posted rent growth in the 40% range, with Denver, Portland, Seattle and Sacramento rounding out the top seven rent-growth leaders in the country. Comparatively, U.S. apartment rent growth averaged 28.5% since 2010.
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“These are attractive living environments,” RealPage Chief Economist Greg Willett said. “These are pretty solid economies relative to some other places and some of these have really solid economic growth and job production.”
San Francisco’s average rents as of Q4 are at $3,288, the highest of any U.S. metro except New York. San Jose’s rents are at $2,680, while Oakland has reached $2,259.
Each Bay Area market peaked at different times. San Jose and San Francisco rent growth peaked in 2011 and 2012 when rent growth reached double digits. Oakland peaked in 2015. Annual rent growth now averages below 3% for all three Bay Area cities.
Denver took the fourth spot and rents there have grown 48.3%, just behind San Francisco. Denver currently has rents of $1,401. Its growth is a significant change from when it was overbuilt in the early to mid-2000s until the Great Recession. Colorado's capital also has been relatively underpriced compared to other markets, Willett said.
Demographics have been ideal for Denver's apartment market, according to Willett. He said there has been a healthy growing economy, a disproportionate number of young adults and a steep premium to buy versus rent. Annual rent growth peaked at 12% in Denver in 2015.
In the Pacific Northwest, Portland rents have grown 45.5% and Seattle's rents are up 43.6% since 2010. Portland rents peaked at 13% growth in 2015. Portland rents are now $1,327, while Seattle has rents averaging $1,725.
Rent growth in Sacramento, which ranked No. 7 with growth of 41%, did not pick up until later in the cycle and has been among the top five metros for annual rent growth during the past six quarters. Occupancy has been tight and construction limited, according to RealPage. Rents average about $1,360, making it among the more reasonably priced metros in Northern California.
Annual rent growth in West Coast markets has slowed down, especially with more supply coming online, according to Willett.
“Rent is still going up, but not as quickly as in the past,” he said.
Across the country, rents average an annual growth of 2.5% to 3%.
While it will be difficult to maintain the same magnitude of growth as the first part of the cycle, Willett said he still expects to see most of these markets on the leader board several years from now.
“A lot of these West Coast markets continue to have … these chronically undersupplied markets,” Willett said. “They don’t have enough existing housing stock relative to the size of the population.”
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