One of the immediate effects at the start of the health crisis, as most states took action to prevent the spread of the virus in March and April, was that construction activity slowed down. While deliveries did not meet initial expectations in all markets, it’s important to note that they only saw a 4.9 percent drop from the previous year, to more than 315,000 units, as states came out of lockdown, according to Yardi Matrix data.
In California, 31,168 units came online last year, 9.8 percent of the nation’s total rental completions. This year, as deliveries are likely to remain in the 300,000 units/year range throughout the country, California markets will likely continue to account for a significant share of new supply. As of January, 84,833
3. SAN FRANCISCO
Coming in at No. 3 is San Francisco, whose robust tech sector has contributed to upticks in the job market, as well as in the number of well-paying positions in the metro. This is not to say that San Francisco has not been impacted by the COVID-19 pandemic. More than 150,000 jobs have been lost in the 12 months ending in November, a 10 percent decline. Only one job sector, financial activities, was up during the same period, adding 2,100 positions. Meanwhile, the leisure and hospitality sector alone contracted by 62,000 jobs. The metro’s unemployment rate reached a record-shattering 13.2 percent in April and has since declined to 6.1 percent in November. However, that’s still a 370 basis-point increase year-over-year.
One interesting trend for the top three markets on this list is that, as a result of the current health crisis and an increasing number of tech companies deciding to allow employees to work remotely even after the pandemic, their residents began relocating to other California metros with less expensive rents or to other states. Developers seem confident that San Francisco continues to be a safe bet. As of January, they were working on 54 projects totaling 9,497 units. Essex Property Trust is developing two projects in San Francisco, including the largest one underway, the 537-unit 500 Folsom.
2. BAY AREA – EAST AND SOUTH BAY
Salesforce is the latest in an array of firms to announce its employees can continue to work remotely after most office workers will likely return to the office. It should not come as a surprise, as the Bay Area is one of the country’s most expensive office and rental markets. But in 2020, the metro’s employment market took a serious hit, following years of upward movement. In the 12 months ending in November, the Bay Area lost 70,100 positions, a 6.1 percent slide. While office-using sectors lost 4,500 jobs during the same period, as the professional and business services sector was up 0.9 percent, adding 2,100 jobs, others reported losses ranging from 3 percent for construction to 23.4 percent for leisure and hospitality.
Because California was one of the first states to impose restrictions meant to prevent the spread of the virus, the completion date for many projects underway in 2020 in the state was moved to 2021. As a result, deliveries this year are projected to surpass 18,000 units. As of January, a little more than 24,000 units were under construction throughout the metro, with the largest project being Irvine Co.’s 1,847-unit Santa Clara Square. At build-out, the seven-building community will be the Santa Clara submarket’s largest multifamily property and the metro’s sixth-largest property.
1. LOS ANGELES
In April, the metro’s unemployment rate skyrocketed from 6.6 percent in the previous month to 20.4 percent. The following month, it continued to increase, reaching 20.8 percent, the highest level on record. In the 12 months ending in November, Los Angeles lost 389,400 jobs, equal to an 8.8 percent decrease. The leisure and hospitality sector alone lost 140,200 jobs, for a 25.6 percent decline.
In 2020, multifamily completions in Los Angeles were expected to reach a record level—and they did. While at the beginning of the pandemic, the prospects were reserved, as developers had to adjust their plans, a total of 11,112 units came online throughout the metro, up 14.4 percent from the previous year. And in 2021, deliveries are forecast to continue to rise, with more than 25,000 apartments underway as of January.
