San Jose Multifamily Report – Fall 2020
While the metro's economy is bouncing back, Silicon Valley rents are recording a significant correction.
San Jose rent evolution, click to enlarge
While fueled by one of the strongest economies, the recovery of San Jose’s multifamily industry has stalled. The California city posted the steepest rent drop among major U.S. metros, down 1.1 percent to $2,737 on a trailing three-month basis through September, while the U.S. average rose for the second-consecutive month to $1,463. The occupancy rate in stabilized properties reflected lackluster demand, down 160 basis points to 94.2 percent year-over-year as of August.
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San Jose sales volume and number of properties sold, click to enlarge
The unemployment rate dropped to 9.5 percent in July from 12.0 percent in April, with preliminary data for August pointing to 7.6 percent. Unemployment claims filed across the state surpassed 8.8 million between mid-March and early October. Meanwhile, the employment market marked its fourth-consecutive month of contractions, declining 6.3 percent year-over-year through July. Its main economic driver—professional and business services—shrunk by only 3.2 percent. Despite elevated uncertainty about employees’ return to the office, projects remain underway or in the planning stages, including the Adobe North Tower and Google’s Downtown West development.
Developers had brought 1,515 units online by September and had another 11,333 underway. Meanwhile, transaction activity dwindled to a total of $554 million, for a price per unit that rose 11.9 percent to $535,977. Accounting for current circumstances, Yardi Matrix expects rents to depreciate 6.9 percent in 2020.
