East Bay Establishes Itself As Regional Housing Leader
As recovery from the coronavirus pandemic progresses, the East Bay is emerging with the distinction of leading the Bay Area in housing creation. The city of Emeryville especially has gained the spotlight as an epicenter of economic growth, with a booming life sciences sector stimulating housing plans.
Emeryville Mayor Dianne Martinez said during a Bisnow East Bay State of the Market digital summit on May 27 that the city has been focusing on the twin efforts of increasing housing at all levels of affordability while making the city a friendlier atmosphere for a diverse range of businesses.
The dual approach has been crucial in driving the city to its position as one of the leading life sciences clusters in the country, she said. Although the sector hinges on proximity to the University of California, Berkeley, a robust supply of affordable housing relative to other parts of the region and a strong public transit system help make companies attractive to employees.
Emeryville’s rising status isn’t without challenges. The city is only 1.25 square miles, putting constraints on development that are familiar to many municipalities in the Bay Area. But this feature also manifests as a quality-of-life bonus, as the small layout simplifies travel for the city’s approximately 12,000 residents, Martinez said.
"Emeryville being one of the few cities in the Bay Area that is not struggling against our regional housing allocation numbers, we are actually proud to provide housing right in the center of a community that's also providing jobs,” Martinez said.
In 2018, Emeryville voters passed a $50M affordable housing bond, and the city recently completed a $64M expenditure package to increase affordable housing creation, Martinez said.
The East Bay’s housing wealth has been at the forefront of change over the past year. Alameda County, which includes Emeryville, was second on the list of top destinations for Bay Area residents who decided to move in 2020, gaining a total of 87,230 residents, according to a report from Cushman & Wakefield. A parallel influx of multifamily housing supply has kept the submarket’s rental recovery at bay.
Emerald Fund principal Marc Babsin said that Oakland’s rental market has offered an important lesson in economic supply and demand. Between 2015 and 2019, Oakland experienced skyrocketing housing rental rates fueling housing construction, much of which began to deliver in 2018 and 2019, Babsin said.
But when the pandemic hit, the urban cores of places like San Francisco and Oakland’s Uptown neighborhood were similarly hit with double-digit rent declines, which coincided with the delivery of 1,300 housing units and another 1,200 so far in 2021, with 1,400 under construction, leading to a significant supply-demand imbalance, Babsin said.
The imbalance coupled with the high costs of construction materials could make future projects harder to pencil if factors don’t shift.
“If you're a landlord and you've got a vacant building, every month that the unit isn't occupied, it's gone forever — you’ve got bills to pay — so you have more and more concessions,” he said. “And now you're seeing three months free on a 15-month lease at a number of new buildings in Oakland.”
Changes needed to solidify the recovery appear to be underway. According to BayRock Multifamily CEO Stuart Gruendl, UC Berkeley’s announcement of in-person classes being held this fall has spurred rent increases in Berkeley. He said this bodes well for his firm's recent housing acquisition in Berkeley and a project under construction in Oakland.
“We're bullish long-term on those markets, and we feel very good about our investments today,” he said.