Berkeley CA - Apartment Owners - Rent Survey Report

Joey Wang

Multifamily Investment Sales SpecialistNewmark Cornish & Carey: Apartment Advisors

[email protected]

March 19 2015

BERKELEY APARTMENTS RENT SURVEY REPORT2010-2014

INTEGRITY KNOWLEDGE

EAST BAY RENTALS CONTINUE TO THRIVE IN HIGH DEMAND MARKETThe diverse appeal of two major research universities in Stanford and UC-Berkeley, a savvy cluster of venture capital lenders and the influx of talent to our technology hub has combined with attractive recreational facilities, cultural resources and climate to create a highly desirable Berkeley area that is just five BART stops from downtown San Francisco.

Rent statistics provided by the Berkeley Rent Board for 2014 continue to reflect the Bay Area’s robust, post-recession prosperity. The strength of Berkeley’s commercial residential selling market is conveyed by consistent rent price growth across studio, one, two and three bedroom apartments, in each of Berkeley’s nine major neighborhoods since 2010. The most drastic change over this five year period is found on Berkeley’s Southside, where one bedroom apartments continue to attract tenants, despite rent increases of 105 percent on average.

In the calendar year of 2014, Northwest and Southwest Berkeley consistently recorded the greatest increases in rent prices across of all Berkeley’s major neighborhoods. Even property types rebounding from rent drops in 2013, including studios at Northside, Southwest and three bedroom apartments in Central Berkeley, have yielded positive gains for owners in 2014. The positive progress recorded in Berkeley’s more precarious neighbourhood markets suggests that the city is experiencing greater demand as a whole, much to the benefit of apartment owners.

At the other end of the spectrum, rent rises in Elmwood were consistently among the smallest for studio, one, two and three bedroom apartments. However, the data’s limitation to rent-controlled buildings (those built before 1980) might create a skewed perception of a lack of rent fee activity in more desirable renting areas of Berkeley, like Elmwood, where the benefits of more modern investment may not be realized. To compensate, additional research provided by RealFacts on Berkeley’s apartment market does measure rent asking prices on units constructed after 1980 that are neither rent controlled, nor monitored by the Berkeley Rent Board. The average asking rents of 1,148 units monitored by RealFacts also reported positive rent growth across studio, one, two and three bedroom apartments.

In addition to rent fees, occupancy data also attests to a strong selling market. Occupancy rates registered in the high nineties percentile, with the Annual Average Occupancy Trend jumping from 92.2 percent in 2013 to 97 percent in 2014.

2010 2011 2012 2013 2014500

1000

1500

2000

2500

3000

85

87

89

91

93

95

97

99

Actual Rent Increases, 2010 - 2014

Year

Annu

al A

vera

geAc

tual

Ren

t ($)

Occ

upan

cy (%

)

Key:

Studio Apartments 1 Bedroom Apartments

2 Bedroom Apartments

3 Bedroom Apartments

Occupancy Level

BERKELEY RENT SURVEY, 2010-2014

North Berkeley Northside

Southside

Elmwood

Downtown Berkeley

Central Berkeley

Northwest Berkeley

Southwest Berkeley South Berkeley

BERKELEY: BREAKDOWN BY NEIGHBORHOOD


3

Studio Apartments: Average Rent Per Month ($)

Year South

BerkeleyNorth Berkeley

Downtown Berkeley

Central Berkeley

Northside Southside Northwest Berkeley

Southwest Berkeley

Elmwood Overall

2010 914 1003 1027 936 1122 843 879 835 923 924

2011 988 ↑ 1112 ↑ 1066 ↑ 952 ↑ 1196 ↑ 924 ↑ 838 ↓ 963 ↑ 884 ↓ 991 ↑

2012 1000 ↑ 1225 ↑ 973 ↓ 1021 ↑ 1326 ↑ 892 ↓ 903 ↑ 1017 ↑ 1097 ↑ 1050 ↑

2013 1053 ↑ 1245 ↑ 1097 ↑ 1112 ↑ 1306 ↓ 1002 ↑ 1085 ↑ 984 ↓ 1189 ↑ 1119 ↑

2014 1297 ↑ 1492 ↑ 1178 ↑ 1243 ↑ 1447 ↑ 1075 ↑ 1138 ↑ 1156 ↑ 1250 ↑ 1252 ↑

Percentage change, 2013 - 2014 ↑ 23.2% ↑ 20.0% ↑ 7.4% ↑ 12.0% ↑ 11.0% ↑ 7.3% ↑ 5.0% ↑ 18.0% ↑ 5.1% ↑ 12.0%


2010 2011 2012 2013 2014700

800

900

1000

1100

1200

1300

1400

1500

Studio Apartments: Average Rent Achieved Per Month ($)

South BerkeleyNorth BerkeleyDowntownCentral BerkeleyNorthsideSouthsideNorthwestSouthwestElmwoodOverall

Year

Dolla

rs ($

)

While studio apartment rental fees have fluctuated more than other unit types in the past, 2014 provided positive growth across every major neighborhood in Berkeley; a response to great strides made in the local economy.

Notably, studios at Northside and Southwest Berkeley rebounded from minor dips in 2013 to register rent price gains of 11 percent and 18 percent respectively.

The other prominent change took place in North Berkeley, where monthly living fees jumped up 23 percent on average, catapulting the neighborhood’s studio apartments to the most expensive in Berkeley.


One Bedroom Apartments: Average Rent Per Month ($)

Year South


Downtown Berkeley

Central Berkeley


Southwest Berkeley

Elmwood Overall

2010 1095 1380 1071 1143 1423 834 1080 994 1245 1140

2011 1121 ↑ 1415 ↑ 1112 ↑ 1156 ↑ 1482 ↑ 1240 ↑ 1138 ↑ 1031 ↑ 1385 ↑ 1231 ↑

2012 1142 ↑ 1460 ↑ 1189 ↑ 1280 ↑ 1628 ↑ 1424 ↑ 1251 ↑ 1105 ↑ 1477 ↑ 1328 ↑

2013 1324 ↑ 1688 ↑ 1283 ↑ 1389 ↑ 1664 ↑ 1445 ↑ 1319 ↑ 1279 ↑ 1602 ↑ 1443 ↑

2014 1521 ↑ 1802 ↑ 1361 ↑ 1532 ↑ 1849 ↑ 1710 ↑ 1565 ↑ 1452 ↑ 1667 ↑ 1606 ↑



2010 2011 2012 2013 2014650

850

1050

1250

1450

1650

1850

One Bedroom Apartments: Average Rent Achieved Per Month ($)


Year

Dolla

rs ($

)

One bedroom apartments across Berkeley registered consistent rent price growth in 2014, continuing a trend that dates back to 2010. Northside recorded the highest prices at $1,849 per month, while Downtown provide the least expensive rental fees at $1,361 per month.

The biggest story surrounding rent price increases for one bedroom apartments in Berkeley is the strong performance on Southside. Having rebounded from the lowest rents of Berkeley’s nine major neighborhoods in 2010, the area cemented its strong demand by surpassing Elmwood to claim the third highest rent prices behind Northside and North Berkeley. This leap could be a direct response to Southside’s close proximity to UC-Berkeley. As Berkeley’s entire apartment market responds to the strong local economy by raising rent prices, students could be opting to share one bedroom residences as a way to keep living expenses affordable.


Two Bedroom Apartments: Average Rent Per Month ($)

Year South


Downtown Berkeley

Central Berkeley


Southwest Berkeley

Elmwood Overall

2010 1417 1718 1462 1525 1992 1945 1375 1346 1955 1637

2011 1479 ↑ 1834 ↑ 1648 ↑ 1502 ↓ 2372 ↑ 2047 ↑ 1527 ↑ 1462 ↑ 2045 ↑ 1768 ↑

2012 1577 ↑ 1933 ↑ 1787 ↑ 1570 ↑ 2412 ↑ 2289 ↑ 1561 ↑ 1453 ↓ 2215 ↑ 1866 ↑

2013 1735 ↑ 2085 ↑ 1977 ↑ 1827 ↑ 2590 ↑ 2359 ↑ 1713 ↑ 1595 ↑ 2325 ↑ 2022 ↑

2014 2028 ↑ 2326 ↑ 2171 ↑ 2052 ↑ 2685 ↑ 2493 ↑ 2103 ↑ 1851 ↑ 2414 ↑ 2235 ↑

Percentage change, 2013 - 2014 ↑17.0% ↑ 11.4% ↑ 10.0% ↑ 12.3% ↑ 4.0% ↑ 6.0% ↑ 23.0% ↑ 16.1% ↑ 4.0% ↑ 10.4%


2010 2011 2012 2013 20141200

1400

1600

1800

2000

2200

2400

2600

2800

Two Bedrooms: Average Rent Achieved Per Month ($)


Year

Dolla

rs ($

)

The market for two bedroom apartment rentals continues to be the most stable of all unit types for consistent price growth.

With the exception of Northwest Berkeley, where rent fees jumped up 23 percent on average, each of Berkeley’s neighborhoods retained its standing in the price rankings from the previous year.

Northwest Berkeley is also the only neighborhood where two bedroom apartment rent increased by more than 50 percent since 2010. As one of the areas that is furthest from the center of Berkeley; Oakland; and San Francisco, the sudden surge in rental prices might be a response to the growing numbers of aspiring Berkeley residents looking further away from these key destinations in the hope of finding more affordable accommodation.


Three Bedroom Apartments: Average Rent Per Month ($)

Year South


Downtown Berkeley

Central Berkeley


Southwest Berkeley

Elmwood Overall

2010 1956 2423 1968 1898 3397 2107 1750 1577 2382 2162

2011 1963 ↑ 2290 ↓ 1993 ↑ 1994 ↑ 2753 ↓ 3195 ↑ 1891 ↑ 1873 ↑ 2352 ↓ 2256 ↑

2012 2270 ↑ 2623 ↑ 2505 ↑ 2431 ↑ 2495 ↓ 3190 ↓ 1639 ↓ 2063 ↑ 2352 - 2396 ↑

2013 2628 ↑ 2685 ↑ 2518 ↑ 2414 ↓ 3288 ↑ 3214 ↑ 1801 ↑ 2260 ↑ 3098 ↑ 2656 ↑

2014 2768 ↑ 3281 ↑ 2804 ↑ 2795 ↑ 3957 ↑ 3546 ↑ 2178 ↑ 2791 ↑ 3234 ↑ 3039 ↑



2010 2011 2012 2013 20141250

1750

2250

2750

3250

3750

4250

Three Bedroom Apartments: Average Rent Achieved Per Month ($)


Year

Rent

($)

Three bedroom apartments recorded price increases across all of Berkeley’s major neighborhoods, continuing a positive theme that has transcended all apartment types for the benefit f multifamily unit owners. Berkley’s Northside continued its recovery from the 2012 lull in rental prices, rising 22.2 percent in 2014 to $3,281 per month. Elsewhere, Southside Berkeley recorded significant price increase movement for the first time since 2011.

The demand that prompted price increases in three bedroom apartments can be partially attributed to two factors: tenants living together to share rising accommodation expenses, and professionals with families relocating to Berkeley in search of a decent setting to raise children; strong educational facilities; and easy access to San Francisco’s tech hub.


Greatest Gains in Actual Rent, 2013-2014:

Studios:1) South Berkeley ↑ 23.2%2) North Berkeley ↑ 20.0%3) Southwest Berkeley ↑ 18.0%

One Bedrooms:1) Northwest Berkeley ↑ 19.0%2) Southside ↑ 18.3%3) Southwest Berkeley ↑ 15.0%

Two Bedrooms:1) Northwest Berkeley ↑ 23.0%2) South Berkeley ↑ 17.0%3) Southwest Berkeley ↑ 16.1%

Three Bedrooms:1) Southwest Berkeley ↑ 24.0%2) North Berkeley ↑ 22.2%3) Northwest Berkeley ↑ 21.0%

Smallest Gains in Actual Rent, 2013-2014:

Studios:1) Northwest Berkeley ↑ 5.0%2) Elmwood ↑ 5.1%3) Downtown ↑ 7.4%

One Bedrooms:1) Elmwood ↑ 4.1%2) Downtown ↑ 6.1%3) North Berkeley ↑ 7.0%

Two Bedrooms:1) Elmwood ↑ 4.0%=1) Northside ↑ 4.0%3) Southside ↑ 6.0%

Three Bedrooms:1) Elmwood ↑ 4.4%2) Southside ↑ 5.3%3) South Berkeley ↑ 10.3%


Studio 1Bd 2Bd 3bd0

500

1000

1500

2000

2500

3000

3500

40002014: Average Rents Achieved

South BerkeleyNorth BerkeleyDowntown BerkeleyCentral BerkeleyNorthsideSouthsideNorthwest BerkeleySouthwest BerkeleyElmwood

Unit Type

Aver

age

Rent

Ach

ieve

d ($

)

GROWING ECONOMY New additions to the San Francisco and Berkeley areas, such as an estimated 400,000 new jobs created in the past four years and company relocations and PrōVen Management’s relocation to West Berkeley, are prime examples of the area’s growing attraction; creating more economic opportunities and revenue for local government through developed infrastructure, refurbishment requirements and property tax.

Five years on from the beginning of the United States’ foreclosure crisis, the sustained demand that is justifying elevated rent levels in multifamily commercial residential apartments suggests that high-income young professionals seeking jobs in the technology sector are joining affluent families and former homeowners moving to the city in search of rentals. Perhaps feeling the rents are too high in San Francisco, their addition to the community is creating a whole new demographic that can afford to pay higher rent fees. City-Data.com has estimated that the, estimated median household income in Berkeley has grown over 48 percent, to $65,887 between 2000 and the end of 2013.

Capitalizing on the demand for accommodation that is bolstered by entrepreneurs, young professionals and higher education students (who typically begin their search for housing at this time of the year), developers are elevating Berkeley’s housing supply through a number of residential and commercial development projects.

NEW RESIDENTIAL AND COMMERCIALS DEVELOPMENTS

In Berkeley’s downtown area alone, over 1,400 units and more than 88,000 square feet of new retail space are being developed across eight projects, including Acheson Commons and The Durant. In the latter case, developer William Schrader Jr. has spoken publicly of his intent to allocate between 70 and 80 percent of the building’s units to students. Berkeley Rent Stabilization Board Deputy Director Stephen Barton revealed last year that one-third of renters in the Berkeley city area are students.

LOCAL GOVERNMENT LEGISLATION

Commercial residential developers are also benefitting from recent measures approved by local government. Berkeley City Council’s 2013 vote to temporarily reduce the fees that developers can pay to the Housing City Trust Fund instead of providing an affordable housing allowance within their developments is one notable example. All projects that were submitted to the city by October 2014, and approved by the Zoning Adjustments Board by October 2016 could pay $20,000 towards the fund, a 40% reduction on the original $28,000 fee.

At the rate that supply is growing, the questions remains if the demand for apartments, highlighted by this rent survey, will sustain. With more units coming onto the market, an apartment seeker’s perception of acceptable monthly rent could change as the city moves on from a lengthy period of limited rental supplies and a shortage of for-sale inventory.

INTEREST RATES

The potential onset of rising interest rates is another factor that might negatively affect the Berkeley area’s selling market in the future. Should the Federal Reserve opt to raise its funds rate from in June, the residual effect on interest rates, combined with more stringent income documentation requirements and stricter qualifying rules for adjustment rate mortgages, might shrink the pool of first-time buyers looking to own property. While these changes might favor commercial residential apartment leasers and the wider renting market, the entire scenario underlines the strength of the selling market in these immediate times.

MARKET VARIABLES AFFECTING RENTAL APARTMENTS


RESEARCH

Emeryville

5980 Horton Street

Suite 1200

Emeryville, CA 94608

510.923.6200

All information contained in this publication is derived from sources that are deemed to be reliable. However, Newmark Grubb Knight Frank (NGKF) has not verified any such information, and the same constitutes the statements and representations only of the source thereof, and not of NGKF. Any recipient of this publication should independently verify such information and all other information that may be material to any decision that recipient may make in response to this publication, and should consult with professionals of the recipient’s choice with regard to all aspects of that decision, including its legal, financial, and tax aspects and implications. Any recipient of this publication may not, without the prior written approval of NGKF, distribute, disseminate, publish, transmit, copy, broadcast, upload, download, or in any other way reproduce this publication or any of the information it contains.

Newmark Grubb Knight Frank has implemented a proprietary database and our tracking methodology has been revised. With this expansion and refinement in our data, there may be adjustments in historical statistics including availability, asking rents, absorption and effective rents.

Newmark Grubb Knight Frank Research Reports are also available at www.ngkf.com/research

About Joey Wang

Joey Wang is a licensed associate with Newmark Cornish & Carey (Emeryville) who specializes in apartment brokerage for multifamily real estate owners, investors and developers of Berkeley, CA, and the San Francisco Bay area looking for a trusted resource to support them in the buying and selling of property.

An alumni of University of California, Berkeley, who continues to reside in the area, Joey’s approach to professional brokerage combines a deep knowledge of Berkeley with a commitment to integrity and developing committed, professional relationships with clients that includes the following services:

• An educated ‘Opinion of Value’ based on carefully assessed property conditions and the local market.

• Customized marketing plans to cultivate awareness of listings and develop competitive interests.

• Dependable updates on market trends and the success of comparable properties.

This unique combination ensures clients attain optimal value when bringing their apartment to the marketplace. Joey’s experience and expertise in sales closure also guarantees the seamless transition of ownership for peace of mind and superior results all-around.

Supported by a firm that has proudly assisted clients for over 75 years, Newmark Cornish & Carey Apartment Advisors have sold more than $147 million of real estate since 2011, closing over 1,100 apartment units for clients.

Joey Wang

CA RE License #01890931

Multifamily Investment Sales Specialist

510.592.4244

[email protected]

Berkeley CA - Apartment Owners - Rent Survey Report

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