COLLIERS INTERNATIONAL East Bay Multifamily Market Report SPRING 2014 > SAN FRANCISCO BAY AREA JOE OWENS Multifamily Investments [email protected]+1 925 279 4605 CA Lic. 01707768 RICH MARTINI Multifamily Investments [email protected]+1 925 279 4614 CA Lic. 01505297 Colliers International > 1850 Mt. Diablo Boulevard, Suite 200 > Walnut Creek, CA 94596 > 925.279.0120 phone > www.colliers.com/walnutcreek
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COLLIERS INTERNATIONAL
East Bay Multifamily Market ReportSPRING 2014 > SAN FRANCISCO BAY AREA
Colliers International > 1850 Mt. Diablo Boulevard, Suite 200 > Walnut Creek, CA 94596 > 925.279.0120 phone > www.colliers.com/walnutcreek
Spring 2014 East Bay Multifamily Market Report
Apartment Research Colliers International
Colliers International > 1850 Mt. Diablo Boulevard, Suite 200 > Walnut Creek, CA 94596 > 925.279.0120 phone > www.colliers.com/walnutcreek
East Bay Overview
Market Insight Commentary
Transaction Volume Picks Up In The 4Th Quarter, However Prices Level OffTransaction volume increased from 39 sales in the 3rd quarter to 57 transactions in the 4th quarter of 2013. Almost every market saw leveling off in terms of cap rates, price per unit and price per square foot. Buyer activity remains strong, despite a severe lack of both inventory and motivated sellers.
Rental rates saw the usual seasonal decrease for the holiday season but closed out the year with solid improvements in 2013. The first wave of new East Bay developments are getting close to delivering.
What Is Driving The Market?Rental demand and low interest rates appear to be the biggest drivers in the market. While many owners are content to refinance and collect their increasing rents, the low available inventory and affordable financing has increased buyer demand for seller’s who do plan to sell in 2014.
Average Rent
Average Cost Per Unit
Average GRM
Conclusions
SellersStrong Buyer Interest
+ Low Inventory
= Good Time To Be A Seller
BuyersStrong Rental Rate Dynamics + Low Interest Rate Environment + Cap Rate Compression= Buyers To Be Selective
Rental Trends East Bay Area
What’s In Store For The Future?East Bay markets should continue to see steady rent growth as astronomical prices in San Francisco and San Jose motivate tenants to move to the East Bay. Tenants ability to tolerate rent increases and higher initial asking rents will improve along with East Bay employment. Vacancy remains low and limited new supply will help push asking rates higher.
Spring 2014 East Bay Multifamily Market Report
Apartment Research Colliers International
Colliers International > 1850 Mt. Diablo Boulevard, Suite 200 > Walnut Creek, CA 94596 > 925.279.0120 phone > www.colliers.com/walnutcreek
Colliers International > 1850 Mt. Diablo Boulevard, Suite 200 > Walnut Creek, CA 94596 > 925.279.0120 phone > www.colliers.com/walnutcreek
Average GRMEast Bay Avg:
9.93
Average Price Per Unit
East Bay Avg: $138,032
All-Time Record Breaking Prices and Rents in 2013Rental rates in the East Bay have increased 7.9% in 2013, adding revenue and value to East Bay apartment buildings. Cap Rates and price per unit leveled off in the fourth quarter. While buyer activity in the East Bay remains strong with multiple offers and over-bidding on many quality listings, buyers are not as aggressive as they have been and should continue to be selective.
8.28
12.30
10.76
10.74
10.47
11.91
11.61
10.39
9.86
9.86
5.00 5.50 6.00 6.50 7.00 7.50 8.00 8.50 9.00 9.50
10.00 10.50 11.00 11.50 12.00 12.50 13.00
Oakland
Berke
ley
Alame
da
SLd / S
Lrnzo / N
wk
Hayward
Castro V
alley
Frmnt / U
n Cty
Ala Co
unty
WalCrk / Lafy
t
Con / Mar / Plst Hl
East CC C
ounty
West CC
County
CC Co
unty
Average GRM
4Q12* 1Q13 4Q13*
$107,051
$187,715
$185,750
$136,089
$145,284
$156,409
$159,000
$134,754
$200,000
$133,504 $1
68,501
$158,002
$50,000
$75,000
$100,000
$125,000
$150,000
$175,000
$200,000
$225,000
$250,000
Oakland
Berkeley
Emrvl
Alameda
SLd / SLrnzo / Nwk
Hayward
Castro Valle
y
Frmnt / Un Cty
Plstn / Dbln / Lvrm
r
Ala County
WalCrk / Lafyt
Con / Mar / Plst Hl
East CC County
West C
C County
CC County
Average Price Per Unit
4Q12* 3Q13* 4Q13*
Average Price Per SF
East Bay Avg: $178
$141.58
$256.13
$261.28
$183.06
$181.63
$180.99
$173.41
$226.79
$180.10 $210.70
$199.88
$100.00
$125.00
$150.00
$175.00
$200.00
$225.00
$250.00
$275.00
$300.00
$325.00
$350.00
$375.00
$400.00
Oakland
Berkeley
Alameda
SLd / SLrnzo / Nwk
Hayward
Castro Valle
y
Frmnt / Un Cty
Plstn / Dbln / Lvrm
r
Ala County
WalCrk / Lafyt
Con / Mar / Plst Hl
East CC County
West C
C County
CC County
Average Price Per Square Foot
4Q12* 3Q13* 4Q13*
4Q 20134Q 2012 3Q 2013
Spring 2014 East Bay Multifamily Market Report
Apartment Research Colliers International
Colliers International > 1850 Mt. Diablo Boulevard, Suite 200 > Walnut Creek, CA 94596 > 925.279.0120 phone > www.colliers.com/walnutcreek
10 + Units | Over $1,000,000 | Last 4 Months | Alameda & Contra Costa CountyRECENT SALES
Address City Sale Price Sale Date Units $/Unit $/SF Cap Rate GRM
225-243 Chumalia St San Leandro $1,962,500 10/16/13 14 $140,179 $212 6.27% 11.20
16035 Maubert Ave San Lorenzo $1,320,000 11/25/13 10 $132,000 $154 6.22% 10.28
33875 11th St Union City $2,385,000 12/18/13 15 $159,000 $227 5.75% 11.61
Spring 2014 East Bay Multifamily Market Report
Apartment Research Colliers International
Colliers International > 1850 Mt. Diablo Boulevard, Suite 200 > Walnut Creek, CA 94596 > 925.279.0120 phone > www.colliers.com/walnutcreek
Research Summary
Bay Area Completions Top 7,000 Units During 2013, completions in the Bay Area topped the 7,000 unit mark – marking a 20-year high annual supply volume for the region. Those additions expanded the total apartment stock 1.3%. And despite record high construction levels, annual rent growth remained strong in the nation’s top apartment market. Looking forward to 2014, even more units are on the way, as a total of 13,097 units were under construction at the end of the 4th quarter 2013. Of the units currently under construction, 8,393 are expected to deliver in 2014.
Looking at construction by Bay Area submarket, SoMa (3,310 units), North San Jose/Milpitas (2,652 units) and Central San Jose (1004 units) accounted for more than half of all development. The Oakland/East Bay submarket has the least amount of units in development with 1,515 units under way which will lead to an expansion of the apartment stock by 0.8%. Multifamily permit activity picked up in the Oakland/East Bay submarket with 244 units receiving approvals during the fourth quarter of 2013, thus taking the metro’s approval volume to 1,980 units in the 11-month period ending in November 2013.
DEVELOPMENT PIPELINE
0
500
1000
1500
2000
2500
3000
4Q08 4Q09 4Q10 4Q11 4Q12 4Q13
Quarterly Annual
0
500
1000
1500
2000
2500
3000
4Q08 4Q09 4Q10 4Q11 4Q12 4Q13
Quarterly Annual New Supply
East BaySource: MPF
Unemployment Rate
6.5%-1.9% (Year/Year) CA Rate: -8.3%
Employment
0.6% Year/Year
1,214,400 Total CA Rate: 1.7% increase
Labor Force
-1.5% Year/Year
1,299,400 Total CA Rate: 0.1% increase
Employment Trends
East Bay Region
Spring 2014 East Bay Multifamily Market Report
Apartment Research Colliers International
Colliers International > 1850 Mt. Diablo Boulevard, Suite 200 > Walnut Creek, CA 94596 > 925.279.0120 phone > www.colliers.com/walnutcreek
Interest rates 4Q 2013
& 1Q 2014
Lenders Competing For Multifamily OpportunitiesLenders adore the Bay Area multifamily market. With the strong demand of housing needs in the Bay Area, lenders feel secure spending their capital on these assets. The agency, life insurance, banks and CMBS lenders continue to be more aggressive in pricing and leverage for multifamily than other real estate product types.
The treasury markets have swung 35bps in the past 2 months. The 10 year treasury rate on November 29th, 2013 was 2.75% spiking to 3.04% on December 31, 2013 and dropping back down to 2.69% on January 29th, 2014. Despite volatility in the treasury markets, interest rates continue to remain at historic lows. There is abundant liquidity in the market and lenders are competing aggressively on pricing and terms especially for the best multifamily assets. Please refer to the chart below displaying average interest rates for multifamily product. For further financing questions please contact, Mandy Pakes http://www.colliers.com/mandy.pakes.
FINANCING TRENDS
MULTIFAMILY
FIXED RATE AGENCY LENDERS PORTFOLIO LENDERS CMBS
TERM LTV INTEREST RATES LTV INTEREST
RATES LTV INTEREST RATES
5 Yr up to 80% 3.70%-4.20% up to 75% 3.60%-4.10% up to 75% 4.60%-4.90%
7 Yr up to 80% 4.20%-4.70% up to 75% 4.10%-4.80% up to 75% -
10 yr up to 80% 4.40% - 5.00% up to 75% 4.60%-5.10% up to 75% 4.70%-5.05%
2600 International Blvd Oakland $1,250,000 Available 24 $52,083 10,800 $116 8.52% 6.00
1060 E 12th St Oakland $2,550,000 Available 25 $102,000 17,993 $142 --- ---5735 Avenal Ave Oakland $2,195,000 Available 30 $73,167 21,960 $100 7.02% 8.69
3701 International Blvd Oakland $1,400,000 Available 13 $107,692 5,000 $280 10.00% 10.33
147 W Richmond Ave Point Richmond $2,250,000 Available 14 $160,714 12,000 $188 6.30% 10.00
619-637 S 23rd St Richmond $1,199,000 Available 10 $119,900 7,052 $170 6.55% 10.08
1318 California Ave San Pablo $1,950,000 Available 16 $121,875 12,804 $152 6.57% 9.11
1640 23rd St San Pablo $2,200,000 Available 20 $110,000 17,832 $123 5.50% 10.40
3081 N Main St Walnut Creek $7,500,000 Available 32 $234,375 24,648 $304 4.67% ---13730 E 14th St* San Leandro $16,000,000 Available 93 $172,043 64,571 $248 5.39% 10.78