November 10, 2009
With unemployment at record numbers, it is no mystery that rents and vacancy rates would weaken in apartments. Especially hit hard are high priced areas such as San Jose, New York, and San Francisco, places where tenants typically leave if they remain jobless.
What is also fueling the decline in vacancy rates is the home buyer tax credits and falling home prices. We personally manage a number of housing units in Silicon Valley and this year we’ve lost a number of the longer-term tenants as a result of the tenants buying homes. In addition, investors are out in full force acquiring homes, townhouses, and condos and converting them into residential rentals.
Despite the weakness however, investors remain bullish plowing money into apartments. The Avalon apartments in Sunnyvale recently secured dozens of bids, and a complex in Millbrae recently transacted at a reported mid 5% cap on trailing 3-month NOI.
Most of the attraction to multi-family is that agency financing is available for acquisitions.
- Apartment Vacancy At 30-Year High; San Jose Leads Rent Declines
- Tax Credits and The Law of Unintended Consequences
- August 2009 RREEF Property Cycle Monitor
- SF Chronicle Article Today On San Francisco Office Space Market
- US Retail Vacancies Zoom to 17 Year High