multifamily market report -...

COLLIERS INTERNATIONAL

East Bay Multifamily Market ReportSPRING 2014 > SAN FRANCISCO BAY AREA

JOE OWENS Multifamily Investments

[email protected] +1 925 279 4605 CA Lic. 01707768

RICH MARTINI Multifamily Investments


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


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.




RENTAL TRENDSAverage

Asking RentsEast Bay Avg:

$1,674

Average Asking Rents

Per SFEast Bay Avg:

$2.06

Average CAP Rates

East Bay Avg: 5.87%

4Q 20134Q 2012 3Q 2013

$2.1

7

$3.7

3

$2.7

3

$2.5

2

$2.2

2

$2.1

9

$2.1

7

$1.8

3

$1.8

2

$1.6

9

$1.8

7

$2.3

0

$2.1

2

$1.8

1

$1.7

1

$1.4

7

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

Ala Co

unty

Berke

ley

Emrvl

Oaklan

d

Frmnt

/ Un C

ty

Plstn

/ Dbln

/ Lvrm

r

Alamed

a

SLd / S

Lrnzo

/ Nwk

Hayw

ard

Castr

o Valle

y

CC Co

unty

WalCrk

/ Lafy

t

SRmn /

Dnvl

Con /

Mar

/ Plst

Hl

West CC

Coun

ty

East C

C Cou

nty

Average Asking Rents Per Square Foot

4Q12 3Q13 4Q13

SALE TRENDS 4Q 20134Q 2012 3Q 2013

$1,7

74

$2,5

02

$2,2

94

$2,1

33

$1,8

98

$1,8

01

$1,7

57

$1,4

65

$1,4

29

$1,3

91

$1,5

14

$1,8

38

$1,7

98

$1,4

47

$1,3

54

$1,2

33

$1,000

$1,150

$1,300

$1,450

$1,600

$1,750

$1,900

$2,050

$2,200

$2,350

$2,500

$2,650

Ala Co

unty

Berke

ley

Emrvl

Oaklan

d

Plstn

/ Dbln

/ Lvrm

r

Frmnt

/ Un C

ty

Alamed

a

Hayw

ard

Castr

o Valle

y

SLd / S

Lrnzo

/ Nwk

CC Co

unty

SRmn /

Dnvl

WalCrk

/ Lafy

t

Con /

Mar

/ Plst

Hl

West CC

Coun

ty

East C

C Cou

nty

4Q12 3Q13 4Q13

6.75

%

4.14

%

5.42

% 6.25

%

5.82

%

5.39

%

5.75

%

5.91

%

5.66

%

5.66

%

4.00% 4.50% 5.00% 5.50% 6.00% 6.50% 7.00% 7.50% 8.00%

Oakla

nd

Berke

ley

Emery

ville

Alame

da

San L

eandro / San Lo

renzo /

Hayw

ard

Castro V

alley

Fremo

nt / U

nion C

ity

Pleasa

nton /

Dublin /

Liverm

ore

Alame

da Co

unty Avera

ge

Walnut Cre

ek / L

afayeQe

Concord

/ MarT

nez / Pleasan

t

Easte

rn Contr

a Costa

Western

Contr

a Costa

Contr

a Costa Avera

ge

Average CAP Rates

4Q12 3Q13 4Q13




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




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

1704 Central Ave Alameda $6,150,000 12/17/13 30 $205,000 $281 4.81% 10.92

400 Marion Ct Alameda $4,100,000 10/18/13 20 $205,000 $326 5.98% 10.77

516 Buena Vista Ave Alameda $1,725,000 11/27/13 10 $172,500 $227 5.77% 10.33

524 Buena Vista Ave Alameda $1,605,000 12/2/13 10 $160,500 $211 5.10% 11.00

1525 Spruce St Berkeley $2,530,000 10/31/13 24 $105,417 $333 6.71% 9.20

2398 Parker St Berkeley $3,500,000 11/15/13 20 $175,000 $202 3.34% 15.10

2610 Regent St Berkeley $3,500,000 10/30/13 18 $194,444 $165 4.40% 12.60

2747 Haste St Berkeley $6,900,000 11/19/13 25 $276,000 $325 2.10% ---

20188 Wisteria St Castro Valley $1,791,000 12/31/13 11 $162,818 $192 5.77% 11.46

20559 Forest Ave Castro Valley $1,800,000 9/20/13 12 $150,000 $170 5.00% 12.35

1491 Bassett Dr Concord $1,394,500 10/22/13 10 $139,450 $188 --- ---

1828 Robin Ln Concord $3,050,000 12/23/13 27 $112,963 $94 5.68% 9.02

10810-10820 San Pablo Ave El Cerrito $46,500,000 12/18/13 159 $292,453 $323 --- ---

3218 Yosemite Ave El Cerrito $1,468,000 12/27/13 10 $146,800 $189 --- ---

4101 Eggers Dr Fremont $3,680,000 9/24/13 22 $167,273 $158 --- ---

21631-21727 Garden Ave Hayward $5,155,000 11/26/13 31 $166,290 $90 --- ---

22555 Linden St Hayward $1,350,000 10/4/13 12 $112,500 $173 4.61% 12.58

25891 Gading Rd Hayward $2,340,000 11/19/13 16 $146,250 $179 6.55% 9.89

27405 Manon Ave Hayward $2,850,000 12/24/13 20 $142,500 $162 6.08% 9.63

280 Flint Ct Hayward $3,825,000 12/20/13 27 $141,667 $133 6.23% 9.50

29359 Dixon St Hayward $3,900,000 12/31/13 24 $162,500 $186 5.62% 10.75

3520 Brook St Lafayette $5,200,000 10/18/13 26 $200,000 $227 --- ---

10900 MacArthur Blvd Oakland $1,284,000 10/31/13 12 $107,000 $150 7.16% 8.36

1495 E 22nd St Oakland $3,100,000 11/26/13 24 $129,167 $129 7.25% 8.52

1528 Alice St Oakland $1,750,000 10/28/13 12 $145,833 $180 5.41% 11.00

1651 Fruitvale Ave Oakland $1,240,000 10/29/13 22 $56,364 $138 --- ---

1715 High St Oakland $2,620,000 9/27/13 33 $79,394 $111 --- ---

1809 Filbert St Oakland $1,070,000 10/11/13 15 $71,333 $131 6.70% 8.44

1810 E 25th St Oakland $2,050,000 9/17/13 23 $89,130 $163 7.50% 7.40

1951 E 30th St Oakland $1,175,000 10/1/13 12 $97,917 $60

2000 Linden St Oakland $1,565,000 10/29/13 22 $71,136 $150 6.61% 7.80

2100 51st Ave Oakland $1,250,000 12/18/13 18 $69,444 $88 6.81% 7.69

2308 Foothill Blvd Oakland $1,035,000 12/10/13 16 $64,688 $168 7.28% 7.70

2518-2530 35th Ave Oakland $4,150,000 10/22/13 52 $79,808 $135 5.12% 8.75

3024 Fruitvale Ave Oakland $1,785,000 10/14/13 15 $119,000 $54 6.81% 8.37

3535 Coolidge Ave Oakland $3,825,000 12/17/13 25 $153,000 $151 --- ---

373 Staten Ave Oakland $2,562,500 10/29/13 13 $197,115 $199 --- ---

3921 Harrison St Oakland $2,051,000 11/19/13 16 $128,188 $154 --- ---

482 40th St Oakland $2,137,500 10/18/13 24 $89,063 $142 --- ---

640 Brooklyn Ave Oakland $1,825,000 1/9/14 18 $101,389 $174 6.31% 8.98

7036 Macarthur Blvd Oakland $1,725,000 10/22/13 29 $59,483 $104 8.01% 6.40

1460 Contra Costa Blvd Pleasant Hill $10,515,000 12/24/13 71 $148,099 $258 5.64% 10.69

530-534 Ripley Ave Richmond $1,060,000 1/3/14 16 $66,250 $120 --- ---

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




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




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%

Interest Only Available - Available

Prepayment Defeasance Negotiable, stepdown Defeasance

MANDY PAKES Commercial Mortgage Broker


Interest Rate Snapshot




ON THE MARKETCurrently For Sale | 10+ Units | $1,000,000+ | Alameda & Contra Costa County

Address City List Price Status Units $/Unit SF $/SF CAP GRM

221 Wilbur Ave Antioch $2,498,000 Available 28 $89,214 12,923 $193 6.30% 9.34

1015 Univsersity Ave Berkeley $3,499,000 Available 12 $291,583 10,484 $334 5.66% 10.48

1360 Berkeley Way Berkeley $3,099,000 Available 19 $163,105 11,011 $281 4.25% 12.33

100 Village Dr Brentwood $5,100,000 Available 52 $98,077 36,890 $138 5.49% 9.58

3480 Royal Rd Concord $1,495,000 In Contract 11 $135,909 --- $181 6.00% 10.99

1507 Amador Way Concord $1,900,000 Available 12 $158,333 10,530 $180 5.50% 12.50

3720 Clayton Rd Concord $1,250,000 Available 11 $113,636 7,051 $177 4.50% 8.58

25190 Cypress Ave Hayward $5,695,000 Available 36 $158,194 --- $185 5.41% ---

27467 Mannon Ave Hayward $6,250,000 Available 36 $173,611 38,941 $160 7.03% ---

22750 Bayview Ave Hayward $3,900,000 Available 22 $177,273 19,783 $197 7.00% ---

21788-21824 Thelma St Hayward $4,000,000 Available 27 $148,148 23,841 $168 --- ---

335 Schafer Rd Hayward $2,200,000 Available 18 $122,222 11,160 $197 6.00% 11.00

22126-22138 Mission Blvd Hayward $2,550,000 Available 17 $150,000 17,000 $150 5.75% ---2856 Fruitvale Ave Oakland $4,725,000 Available 42 $112,500 --- $189 5.45% 9.80

5670 & 5678 Telegraph Ave Oakland $1,699,000 Available 10 $169,900 6,194 $274 5.44% 8.53

3525 Lyon Oakland $6,600,000 Available 108 $61,111 39,142 $169 2.50% ---2856 Fruitvale Ave Oakland $4,725,000 Available 42 $112,500 24,972 $189 5.45% 9.80

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

41078 Farallon Common* Fremont $6,250,000 Available 40 $156,250 35,115 $178 5.99% 11.50

713 Trancas St* Napa $13,950,000 Available 72 $193,750 60,752 $230 5.88% 10.89

602 Wimbeldon* Lodi $7,450,000 Available 107 $69,626 68,981 $108 6.70% 8.10

1176 Rosemarie Ln* Stockton $7,200,000 In Contract 190 $37,895 131,148 $55 11.49% 5.23

210 S First St* San Jose $11,900,000 In Contract 36 $330,556 28,048 $424 5.29% 13.18

1973 Jacqueline* Concord $699,000 Available 5 $139,800 4,176 $167 6.05% 10.75

1471 Reganti Pl* Concord $750,000 Available 4 $187,500 3,992 $188 4.95% 12.92

* Colliers International Listing Source: Loopnet & Colliers Research

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