With employment growth finally taking off in the East Bay, demand for apartments is expected to pace ever-higher this year, as rents skyrocket across the already popular rental market. Average vacancy fell to 3.5 percent in the first quarter of 2012, 80 basis points lower than a year ago and representing the metro’s lowest rate since 2001.
Hendricks & Partners reports that the East Bay—an area that includes cities like Oakland, Berkeley, Alameda and Richmond—added 15,400 jobs from March 2011 to March 2012, translating to a 1.6 percent increase in overall employment. As a result, the unemployment rate dropped to 9.8 percent, down from 10.7 percent in 2011 and 11.4 percent in 2010.
Supporting the rise in employment is the crucial ports and trade sector, with exports from the Port of Oakland rising 18 percent in 2011. Hendricks & Partners projects that trade volume will continue to increase throughout 2012, and 3,500 new jobs have already been added in the wholesale, transportation and warehouse sectors to service such trade.
Of course, higher employment leads to higher occupancies, and higher occupancies have led to substantially higher rents across the metro. Rent growth overall virtually doubled over the last year, from 1.6 percent in March 2011 to 3.1 percent in March 2012, and the average metro-wide rent was $1,391 per month. This surpasses the peak of $1,387 per month rents saw in 2008 before the financial crisis.
Further driving the increases in rents and occupancies is the fact that construction completions have been virtually non-existent, with no near units coming online in the first three months of 2012. In contrast, 442 units were completed in the first quarter of 2011. Hendricks & Partners notes that a total of 228 market-rate apartment units are expected to come online before the end of the year.
The most popular submarket in the region during Q1 2012 was South/East Alameda County, which includes cities like San Leandro, Hayward and Fremont. Overall vacancy in these areas dropped 80 basis points between 2011 and 2012 to 3 percent, and average rent stood at whopping $1,504 per month.
On the other hand, the least popular submarket during this time was North/West Alameda County, which includes cities like Oakland, Alameda and Berkeley. Vacancy there stands at 3.9 percent, and average rent came in at $1,371 per month. However, this area also saw the largest rent increase over the last year—at 3.5 percent—indicating it may be catching up with its regional competitors.
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