For the last several years our Bay Area property management teams have seen rates grow steadily, but during the first quarter of 2014 the increases reached near double digits across the board. Oakland boasted a 9.1 increase in rental growth, while San Francisco and San Jose came in slightly lower, rising 8.1 percent and 8.7 percent, respectively. Although we’ve seen positive growth in the Bay Area for a significant length of time, these numbers are exceptionally exciting. The average rate for the properties managed by our Bay Area property management team is $2,043 per unit per month, nearly 10-percent higher than the same period in 2013.
What’s caused this jump in acceleration? In short, growth in the job market. Across the Bay Area, the total number of jobs has increased between 3.9 and 4.4 percent depending on the area. This is fantastic news for both job seekers and rental property owners: the current supply of housing in the Bay Area can’t stand up to the new influx of residents, and due to the basic laws of supply and demand, rentals handled by Bay Area property management are an incredibly hot commodity.
However, there are other factors in play that enable us to accurately gauge how long this upturn will last. Developers recognized the current trends, and where they would lead, a few years ago, prompting them to start constructing new rental properties. By the end of 2014 and into 2015, many of these units will be available for rent, most likely slowing down the rental acceleration in the Bay Area.
But, we say “most likely” cautiously. The first cycle of construction was completed about two years ago, causing a slight slowdown in rental rates. But the need for new units quickly surpassed the new supply, prompting this current cycle and the dramatic growth in rental rates seen by Bay Area property management professionals in the last quarter. We expect supply levels to peak again by the first quarter of 2015, and possibly by the last quarter of 2014.
Our experience in Bay Area property management, and the current numbers, tells us that growth will cool after this peak as more units become available, but it will still remain in an upswing. On average, the Bay Area should still see growth around 6-percent, while certain areas, including Oakland, will increase a bit more than that. Yet if job growth stays on track, there should be a dramatic re-acceleration in a few years.
Read more about the current cycle. Learn more about how rental rates affect the overall economy.