San Francisco/Oakland Rent Spread Exceeds $800 Monthly

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OAKLAND, CA—Supply growth has nearly quintupled as builders target the urban core. Capitalizing on the rent spread that can easily exceed $800 per month between San Francisco and Oakland, developers are targeting numerous deliveries inside the urban core of Oakland this year, according to Marcus & Millichap’s latest report.

Indeed, during the last decade, the biggest difference for Oakland is institutional ownership gaining interest in that new construction within the city, Stephen Jackson, first vice president with Marcus & Millichap, tells GlobeSt.com. He says this institutional ownership is changing the dynamics of the Oakland market, which was previously made up of private owners.

“This compresses the cap rate and pushes value,” Jackson tells GlobeSt.com. “The rising rents in the Bay Area have resulted in more Uptown/Lake Merritt interest. Specifically, Adams Point has always been the darling. It has buildings that are similar to San Francisco rent control buildings and a comparable renter profile, so it is attracting San Francisco buyers at two-thirds the price of San Francisco. And new tenants from San Francisco are looking for rent relief and an easy commute. Oakland is essentially a San Francisco neighborhood.”

Locations along the BART line, particularly between Interstate 880 and Interstate 580 along Broadway, have proved extremely popular with tenants, encouraging a construction boom in core urban neighborhoods, where more than 80% of this year’s supply will open for leasing. While completions will jump to nearly 5,000 units in 2019, tenants will be most interested in new class-A apartments due to the considerable discounts relative to San Francisco. This will limit vacancy increases to marginal upticks in the most heavily impacted neighborhoods, says the report.

Jackson recently joined the Oakland office of Marcus & Millichap, along with Joe Owens, who will specialize in the disposition of multifamily properties in Northern California. Previously with Jones Lang LaSalle, Jackson and Owens are first vice presidents with Marcus & Millichap.

“Steve and I have been colleagues in the industry for many years and I am very happy to bring the success he and Joe have achieved on behalf of Bay Area multifamily investors to Oakland,” said David Nelson, regional manager of Marcus & Millichap’s Oakland office. “The broad experience, proven track record, and deep knowledge of the East Bay multifamily market that Steve and Joe provide will be of great value to our clients, and their presence in the Oakland office gives our multifamily team a huge boost.”

Jackson began his career in 2005 in Marcus & Millichap’s San Francisco office before moving on to Colliers as vice president and then JLL, where he served as a senior vice president. He’s a multifamily broker who has worked with REITs, pension funds and high-net-worth private investors. For nearly 15 years, Jackson has gained expertise in multiple multifamily segments including core assets, value-add, Section 8 and Section 42. During his career, he has sold more than $1 billion of commercial real estate assets.

Owens was introduced to commercial real estate brokerage as an intern at Marcus & Millichap in 2005. After graduating from the University of California, Berkeley, Owens joined Colliers, where he partnered with Jackson. They both moved to JLL in 2016, where Owens served as a vice president before rejoining Marcus & Millichap this year. He works with institutional and private clients on multifamily acquisitions and dispositions throughout the Bay Area.