After taking a nosedive last year, apartment rents in major tech cities appear to have bottomed out and are now on an upward trajectory, according to a CBRE report.
The rise in remote work policies due to the coronavirus pandemic that enabled people to exit the urban cores of major metros around the country impacted San Francisco the most, severely causing the biggest rental rate drop last year. However, the now lower rents are expected to lure renters back to the historically pricey city.
The report tracked 20 markets that all experienced rental rate losses in 2020 averaging a decline by 11.6% between February 2020 and March 2021. However, the data point shows a modest improvement since January 2021 as the year began with the average rent down by 13.2% compared to February 2020.
“We do think rents have bottomed out sometime in January or so, and we're starting to see rental increases across the board in most of our Bay Area markets with the exception of Oakland, which is a little bit lagging,” CBRE Vice Chairman Andrew Behrens said.
Among cities tracked, S.F. saw the steepest decline between February 2020 and March 2021 at 23.3% with Mountain View the second-lowest at 21.3%. San Jose’s drop was closer to the average at 12.2% due to lower population loss during the pandemic. Portland, Oregon, only dropped by 6.8%.
“San Francisco is a much more dense environment than Mountain View or San Jose and as a result it was harder for workers to work from home in that environment where unit sizes on average are significantly bigger in other markets than they are in San Francisco," Behrens said. "San Jose has a newer housing stock compared to San Francisco.”
Behrens attributed Oakland’s lag in market recovery to an influx of housing supply early last year, which is now giving renters more options in that city, limiting rate growth.
Overall the outlook is positive mainly due to a larger share of the population becoming vaccinated and signs of migration back to the urban core with major employers announcing office re-openings to varying degrees. The planned reopening of California’s economy on June 15 means that urban amenities put out of commission by the pandemic should become positive assets for cities like S.F. again.
“I think people are starting to recognize that if they're going to be renters, they have an opportunity to try and capture as close to the bottom as possible,” Behrens said. “San Francisco being a rent-controlled city, whatever they lock in now they get to keep for a long time. So I think there's a sense of urgency.”
