Bay Area Effective Rents Up 9% in Just 90 Days

The Bay Area apartment market is roaring back from the pandemic. Berkadia Institutional Solutions’ concessions survey found the market has rapidly rebounded in only the last 90 days. At the end of March, apartment concessions offered 7.1 weeks of free rent, and by the end of June, concessions decreased to only 3.2 weeks.

“It is happening very rapidly, and I think more rapidly than a lot of people expected. Things have turned around just in a few months. Just from the data that we collected, the picture in June is dramatically different than the data in March. Concessions decreased from seven weeks of free rent down to only three. That is a 9% effective rent increase in 90 days,” Brett Betzler, senior managing director at Berkadia Institutional Solutions, tells GlobeSt.com.

As businesses and cultural life in the City of San Francisco has reopened and companies have started to call workers back to the office, renters have returned. “It is people moving back to the Bay Area in anticipation of going back to work. That is actually happening throughout California,” says Betzler. “San Francisco rents specifically dropped so much because it lost the nightlife and all of the great things that people want to do when they live in San Francisco. Those things are also coming back, and that is helping to drive demand.”

Anecdotally, some owners are reporting that rents have already returned to pre-pandemic levels. “We were marketing a property in Santa Clara, and just before we take offers on it, we updated our rent survey, and we saw some pretty significant rent survey from just 30 days prior,” says Betzler. “I asked one of the owners what they were seeing, and they said, ‘we pushed our rents and people keep signing leases, and we push them again and people keep signing. We are almost back at pre-COVID levels.’”

Rent data overall does not yet show a return to pre-pandemic pricing, but Betzler expects it to get there soon. The return to office is playing a role, particularly as many companies have announced employees would return to the workplace by Labor Day, but limited new construction is also fueling rent growth. “There have been almost no new ground breakings of office developments in the last 18 months. It takes months for developments to start, and even when things improve, it is going to be six to 12 months for a lot of developments to get back on track,” he says. “So, we are expecting to see the lowest levels of supply in the last 20 years.” For both reasons, Betzler expects strong leasing through the holidays.

While San Francisco rents are rebounding quickly, nearby Oakland has not experienced the same trend. In Oakland, concessions had only fallen to 9.4 weeks at the end of June from 10 weeks at the end of March. “People are moving to Oakland just like they are moving to the other Bay Area markets. The difference is that as of December 2020, Oakland had 29 active lease-ups going all at the same time,” says Betzler. “Oakland just had a bigger pipeline than any other market. Once they get through that, I expect to see the exact same trend where suddenly concessions disappear and you have a huge pop in effective rents.”