Tech Employment Hub Drives South Bay Multifamily Demand
Overall, rent collections remain strong and well-capitalized investors are expanding portfolios by taking advantage of the historically low interest rate options on new loans.
SAN JOSE—For the past seven months and then some, the work from home phenomenon has pushed demand for even more housing. Just how will this impact the South Bay multifamily market in the future? Adam Levin, executive managing director for Levin Johnston of Marcus & Millichap, recently weighed in on this demand amid a new normal.
GlobeSt.com: What are some of the characteristics of the demand for multifamily investment properties in the South Bay market?
Levin: In the Bay Area, we continue to see strong demand for multifamily investment properties. Despite the economic uncertainty that looms over the market due to the pandemic, rent collections continue to remain strong overall and we’ve actually seen some well-capitalized investors be able to expand their portfolios by taking advantage of the historically low interest rate options on new loans.
While the demand for well-located assets, especially those with strong in-place cash flow, remains high, some investors are sitting tight before making moves and reevaluating when they want to jump back into the marketplace. With COVID-19 safety measures in place, there continue to be a few additional hoops to jump through with escrows and sales, but we are quickly adapting with more virtual tours and being respectful if a tenant does not want us to enter their units during the inspection process. The South Bay in particular, which has long been the country’s top tech employment hub, will continue to drive multifamily demand.
GlobeSt.com: With COVID-19 and work-from-home still underway, how do you see the pandemic affecting the multifamily market in the short and long term?
Levin: While COVID-19 has certainly required many individuals to adjust to the new normal, the adoption of working remotely has been on the rise for quite some time. The pandemic has helped companies realize that employees are just as productive, if not more productive, working remotely.
That said, we believe that many firms will adopt of hybrid of working at home and the office, rather than go completely remote. This means that the Bay Area will continue to attract new residents due to employment opportunities, and demand will perhaps increase and expand, as more people commute to work only part of the time, and thus are more comfortable living slightly farther from their offices.
We are also witnessing an increasing demand for home offices, and many multifamily developers and owners are building co-working spaces into their rental properties or improving existing spaces.