Top California Markets for Multifamily Construction Activity

While metros such as Dallas, Austin and Phoenix seeing rental market performance increase  so well since the onset of the health crisis, most California markets are still in a housing crisis. California recovers at a slow pace, with developers struggling to meet the demand for housing, especially in the affordable segment.

In the list below we’re highlighting the top multifamily markets in California using Yardi Matrix data as of the end of October 2022. Combined, 94,970 units were under construction in California in 2022, accounting for a little over 9 percent of the units being built across the country.

Rank	Metro	Units Under Construction	Units Delivered 2022 YTD	Units Delivered 2021	Projects Under Construction 2022 YTD
1	Los Angeles	33,114	6,487	13,037	236
2	San Francisco	20,244	5,740	10,820	108
3	Bay Area – South Bay	8,908	1,124	7,230	34
4	Orange County	8,407	1,497	2,616	24
5	San Diego	7,138	2,862	3,417	29
6	Sacramento	7,104	1,588	2,120	30
7	Inland Empire	4,737	404	2,136	23
8	Central Valley	3,851	1,071	2,780	31
9	Central Coast	1,467	254	728	14

1. Los Angeles

The Los Angeles multifamily market had 33,114 units under construction, a 35-percent share of California’s units under construction as of October 2022. With 6,487 units already delivered year to date, accounting for 30 percent of statewide deliveries, the metro remains the strongest market in California. In 2022, construction started on 8,852 units, down by one third from last year’s overall numbers, making it largely unlikely for 2022 to keep up with with 2021 figures.

This year’s amplest construction is Carmel Partners’ 910-unit Vox. With 910 units, the partially affordable community was delivered at the end of September. Its design focuses on integrating music, sound and movement throughout, Andy Sands, Carmel Partners’ managing partner said in an interview with Multi-Housing News.

2. San Francisco

With 5,740 units delivered as of October 2022, the San Francisco metro delivered roughly half the amount of units it did in 2021 overall, with construction lagging last year’s pace in the metro. However, San Francisco’s robust tech sector continues to contribute to the job market, with well-paying positions within the metro, helping it rank highly on our list. Moreover, when it comes to new projects, in 2022 construction started on 6,635 units by October, while in 2021 the number was not that much higher, at 7,363 units.

The 599-unit Station Park Green in San Mateo, Calif., is the metro’s biggest lifestyle community to have been completed this year. Owned and managed by Essex Property Trust, the community also has 49 affordable units.

3. Bay Area–South Bay

Even though the Bay Area’s multifamily market was one of the hardest hit by the pandemic-induced downturn of 2020, its construction sector has recently bounced back and is making strides. Additionally, this year in April, the unemployment rate in the metro marked the lowest rate in more than a decade, at 2.2 percent, according to the Bureau of Labor Statistics.

By October, construction had started on a total of 3,776 units throughout 13 properties in metro San Jose in 2022, whereas in 2021, there were 14 properties and some 2,600 units. There were 8,908 units under construction in the South Bay area, with roughly 42 percent of them starting construction this year.

4. Orange County

Orange County showed remarkable resilience during the fallout from the pandemic and then began a steady recovery, especially in the second half of last year. This, coupled with the metro’s solid fundamentals, gave the market a strong start in 2022, with rent growth, economic expansion and occupancy all outperforming national levels.

However, the construction pipeline consisted of only 625 units underway, while in 2021 construction started on 3,028 units. A total of 1,497 units were delivered this year so far, out of which 1,325 target the Lifestyle segment. Another 1,427 affordable units are also currently under construction.

5. San Diego

As per Yardi Matrix data, the San Diego market has one of the largest average occupancy rates in stabilized assets in the state.  Multifamily report in June, occupancy in the metro had then increased 90 basis points over 12 months, while year-over-year rent growth clocked in at 20.8 percent, thus outperforming the national average.

After the 3,417 units delivered in 2021, we now have 2,862 multifamily units delivered by the end of October. A total of 700 of these units are Renter-by-Necessity, while the other 2,162 target the Lifestyle segment. An additional 1,035 fully-affordable units are under construction, while 646 units were delivered in fully affordable communities this year.

6. Sacramento

With a strong population growth trajectory, Sacramento’s job market is still rebounding, showing a rate of growth of 5 percent, with the government, education, leisure and hospitality sectors having the largest shares of employment, expanding by 30 basis points over the national average, according to Yardi Matrix data.

The city’s construction pipeline remains slow, with only 7,104 units under construction by October 2022 and 1,588 units delivered this year, less than half of last year’s 2,120 delivered units. Construction started on 1,309 multifamily units in the metro this year.

7. Inland Empire

The market’s proximity to Los Angeles and Long Beach ports made logistics the area’s main economic driver. Being that it is Southern California’s most affordable market, more and more people move into the metro, with almost 350,000 residents added over the past decade.

Housing demand is strong, but development is typically limited in the metro. Only three properties comprising a total of 404 units were delivered by the end of October. Construction has started this year on another 1,309 units, less than half of last year’s 2,833 starts.

8. Central Valley

With no MSA to drive multifamily demand and a slighter economy compared to most California markets on the list, Central Valley still had 1,071 units delivered this year, compared to last year’s 2,120. Another 3,851 units are under construction, with 1,610 of them being started on this year. A total of 263 affordable units were delivered in the Central Valley market from the start of the year until October.

9. Central Coast

The Central Coast had the lowest rental supply pipeline in the state of California. Only two properties comprising a total of 254 units were delivered year-to-date. Construction has begun in 2022 on 10 communities comprising 939 units. No affordable units were delivered in the market this year, but 985 affordable units were underway.