East Bay Rental Housing Association’s 9th Annual Survey Shows Strong Rental Growth, Low Vacancies and Solid Rents

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9th annual rental survey data from East Bay RHA shows strong rents driving apartment-building sales and Walnut Creek and Oakland’s Rockridge have highest rents per square foot.

Rents are up, vacancies are down and an influx of renters migrating to the East Bay from San Francisco in search of lower rents has resulted in an improved quality of tenant applications for landlords and strong apartment-building sales, according to results released today from the 9th Annual Rental Survey of the East Bay Rental Housing Association (East Bay RHA).

“A robust recovery appears to be in the works for both the East Bay rental market and the apartment-building market,” said Link Corkery, chair of the Market Conditions Committee for East Bay RHA. “Strong rents are driving apartment building sales, primarily due to San Francisco investors leaving the city for better returns in the East Bay.”

The organization’s 2011 rent survey covered rental property owners in Northern Alameda and Contra Costa counties and encompassed 629 buildings containing 5,628 apartments. The average size of the buildings in the survey was 9 units.

A preview of the survey is available at http://ebrha.com/RentSurveyPreview.

“Survey participants tend to mirror the existing housing stock and consist of smaller property owners rather than owners of large newer apartment buildings,” said Corkery. “The majority of our members are ‘mom and pop’ operations,” he said.

“Strong job growth in San Francisco has fueled much of the rent growth in the East Bay, and vacancies remain low due to the continuing influx of new renters who have been pushed out of San Francisco’s pricey market,” he explained. “While there are no signs of a softening, we have to keep in mind that this positive market news is all about jobs, jobs, jobs, and there is no guarantee this trend will continue unabated.”

Among cities surveyed, Walnut Creek rents averaged $2.26 per square foot for the highest in the East Bay, and Oakland’s Rockridge area hit $2.00 per square foot on turnover rents.

Here is a summary of the findings:

Vacancy Rate
The combined overall vacancy rate for the East Bay in 2011 was 3.1 percent.

In Northern Alameda County, the overall vacancy rate was 3.0 percent, down from 3.7 percent in 2010 and 5.2 percent in 2009. Oakland’s vacancy factor was 3.4 percent, down from 4.4 percent in 2010 and 6.1 percent in 2009. Berkeley’s vacancy factor was lower at 2.4 percent and Alameda’s vacancy rate was even lower at 1.6 percent.

In Contra Costa County, the overall vacancy factor was slightly higher than Alameda County, coming in at 3.2 percent. Antioch was the highest with 7.9 percent and Concord with a rate of 4.8 percent. Lafayette and Martinez reported 2.0 percent and Walnut Creek reported 3.1 percent.

Average Rents
The overall average rent for Northern Alameda County in the 2011survey was $1,151, slightly above the 2010 rent of $1,146. Contra Costa County’s average rent was $1,176.

Berkeley had the highest rents in Northern Alameda County with the Elmwood District (94705) leading the way at $1,560, followed by the North Campus area (94709) at $1,503.

Walnut Creek had the highest rents in Contra Costa County, with average rents of $1,534, followed by Lafayette at $1,495. Antioch average rents were the lowest at $943.

Oakland’s average rents were in the middle of the pack. Oakland’s Rockridge District (94618) had the highest rents, averaging $1,378, up more than 8.0 percent from 2010. Oakland’s Adams Point District, adjacent to Lake Merritt, averaged $1,184, 6.3 percent higher than 2010 levels. One‐bedroom apartments in Adams Point averaged $1,052, and in Rockridge they averaged $1,108.

Turnover Rents
In rent‐controlled communities like Oakland and Berkeley, average rents tend to be generally below market levels because tenants with low rent‐controlled rents bring down the average. Turnover rents reflect the owners’ expectations of market rents. In non‐rent controlled communities where there are no restrictions on rents owners can charge, the gap between average rents and turnover rents may not be as great because rents can be raised more easily and kept closer to market rent.

For instance, the turnover rents in Contra Costa County were only 1.7 percent higher than average rents in 2011. Adams Point one‐bedrooms average $1,052 but the turnover average is $1,141, 8.5 percent higher. Rockridge one‐bedroom units average $1,108 but the turnover average is 8 percent higher at $1,197. One‐bedroom apartments in Berkeley’s North Side average $1,212 but upon turnover, rents were 11.4 percent higher at $1,350.

“This also explains why Oakland and Berkeley apartment buildings sell at higher multiples in some cases, because buyers know there may be an ‘upside’ if a low rent‐paying tenant moved out,” said Corkery.

Average rents and average turnover rents can be viewed in more detail in the report, posted at http://www.ebrha.com.

Job Growth
East Bay RHA’s Market Conditions Committee has used job growth information to accurately predict the rental market during the nine years it has conducted this rental survey.

“The committee found that when job growth is positive on both sides of the Bay, rents in the East Bay go up,” explained Corkery. “Conversely, when job growth is negative on both sides of the Bay, rents go down. This formula allowed us to accurately predict rents going up in 2005 and going down in 2009.”

Comparing the job growth graph from April 2011 with the May 2012 graph shows a dramatic increase in job growth, particularly in San Francisco, over the last year.

“May 2012 job growth in San Francisco hit 3.1 percent. During the last streak of positive job growth from June 2004 to October 2008, San Francisco hit a high of only 2.7 percent in July 2007. This means that the current job growth rate is the highest it has been since the last peak in September 2000, when the job growth rate hit 4.9 percent right before the dot‐com bust,” said Corkery.

About East Bay RHA
East Bay RHA is an Oakland-based nonprofit organization representing owners and managers of apartments, condominiums, duplexes, single-family homes and other types of rental housing in Alameda and Contra Costa counties. It represents more than 18,500 units in 25 cities. EBRHA members are mostly small property owners who are good, thoughtful landlords and seek to provide a safe, comfortable environment for their members.

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