And as your investment partner, we scour listings and pore over endless research briefs to stay up to speed on market trends. What are occupancy levels? Asking rents? How much new supply is coming online? These all impact a landlord’s pro forma and must be monitored closely.
Let us do the heavy lifting.
Below is a snapshot of the Oakland Multifamily Market heading into Q3 2017. Data courtesy of the CoStar Group, Real Capital Analytics, and Marcus & Millichap.
Oakland Multifamily Market Highlights
- The Oakland multifamily market has been the beneficiary of a booming local economy and new household formation. People are starting to see Oakland as a viable (and more affordable) alternative to rentals in the San Jose or San Francisco metro areas, and as a result, are moving to Oakland in droves. The Oakland area is expected to add another 136,300 residents (64,000 total households) between 2017 and 2022.
- As of Q1 2017, an estimated 43% of Oakland households were renters.
- Total employment in Oakland increased 2.8% between Q1 2016 and Q1 2017. Oakland employers added an estimated 31,400 jobs during this period. These jobs were heavily concentrated in government (5,300) and education and health services (6.700). Job growth is expected to climb another 2.2% in Oakland this year.
- Revitalization efforts in downtown Oakland have led to a boom in new multifamily construction. Approximately 1,740 new apartment units came online last year. That number will nearly double in 2017 with the delivery of an estimated 3,300 units over the course of 2017. The majority of these units are located in downtown Oakland, with some real estate experts expressing concern that the urban core may be reaching its saturation point of high-end units.
- Multifamily apartment rents have climbed a staggering 6.0% so far this year. As of the end of Q2 2017, the average effective rent in the Oakland metro area is now $2,190 per month. Class A multifamily assets have experienced the most robust year-over-year rent growth, increasing 7.3% since Q1 of last year. The average Class A rent in Oakland is now $2,781 per month.
- Vacancy rates in Oakland have climbed 30 basis points this past year but remain low, at just 3.1%. Elevated vacancies are most pronounced at newer properties. At buildings constructed since 2010, the average vacancy rate was 6.3% as of the end of Q1 2017.
- Despite record supply growth, experts anticipate the vacancy rate across metro Oakland to increase a meager 20 basis points this year.
Oakland Submarket Trends (as of Q1 2017)
|Submarket||Vacancy Rate||Y-O-Y Basis Point Change||Effective Rents||Y-O-Y % Change|
|Hayward/ San Leandro/ Union City||2.1%||40||$1,893||2.7%|
|Northeast Contra Costa County||3.1%||40||$1,548||7.9%|
|San Ramon/ Dublin||3.1%||-40||$2,251||1.4%|
|Walnut Creek/ Lafayette||3.7%||90||$2,257||7.8%|
|Northwest Contra Costa County||3.8%||0||$1,635||6.4%|
Sources: CoStar Group; Real Capital Analytics
Oakland Multifamily Investment Trends
The excitement over Oakland’s multifamily market has drawn competition from additional investors, driving up prices and suppressing cap rates in the process.
Investors are increasingly opting to buy and hold their Oakland assets which has limited supply and led to significant price appreciation. As evidence:
- Transaction volume has decreased 6% over the past year;
- The average price per unit increased a staggering 19% to almost $236,200 per door; this marks the third straight year of double-digit price increases; and
- Year-over-year cap rates declined in Oakland; average cap rates hover just around 7%.
In Oakland, the bulk of trading continues to be in the Class C multifamily segment. Class C properties offer higher returns and there’s more supply than either Class A or B in Oakland. The majority of trading occurs in downtown Oakland and Berkeley, though investor interest has picked up in Fremont and Hayward over the past year as well.
Demand for Oakland multifamily apartments is expected to remain strong for the latter half of 2017, driven by demographic trends and a robust local economy.
As your investment partner, we will continue to monitor these market trends throughout the year.