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Remember years ago when homeowners were selling high priced homes in the San Francisco Bay Area and moving in droves to the Sacramento region? Well, get ready for the next way!
A recent Bloomberg article suggests that San Francisco is currently the hottest office market in the country, as indicated by the pending sale of a 10-story office building for $800 per square foot in SOMA (South of Market Area), a submarket where rents are up 22% over the past year. This would be the City’s highest selling price for an office building since the commercial real estate market peaked in 2007.
Follow my logic here… Bay Area jobs are coming back in a big way, led by robust increases in the technology industry. Most of these young workers, in their 20’s and 30’s, are seeking multifamily rental housing. As a result, rental demand for apartments in cities like San Francisco and San Jose is going through the roof with 2012 forecasted vacancy rates of +/- 3%. Not surprisingly, Marcus & Millichap reports that San Jose and San Francisco have taken the # 1 and # 2 spots in the National Apartments Index, behind # 3 New York.
What follows next? Well, multifamily property values are on the rise in the Bay Area with compressing investor yields (cap rates), suggesting investors will soon be looking to nearby markets for better investment returns. Given the Sacramento area was hit so hard with housing foreclosures, many people have been forced to rent apartments, which is driving region-wide multifamily vacancies below 5% in 2012.
The number of new multifamily listings for apartments in the greater Sacramento is most certainly on the rise. Here on the ground, it feels like we may have it bottom late last year in terms of apartments sale price per unit. Demand should increase from here, along with upward pressure on both rents and sale prices.
To give you an idea… an 11 unit REO apartment complex sold in South Sacramento on 6/30/11 for $34,000 per unit to a value add investor at 9.9% cap rate. The property was 91% vacant at the time and in terrible physical condition. Over the next six months, the investor rehabbed units, replaced patio decks, painted the entire property, and leased up the 10 vacant units at market rents.
After a turnaround period of only six months, this property is now back on the market with an asking price of $67,000 per unit (8.1% cap rate). Notice this cap rate is even stronger than a recent sale just two blocks away, which closed on 11/1/11, where East West Commercial Real Estate brokered the sale of a stabilized 14-unit apartment property to a foreign investor at 8.5% cap rate ($62,500 per unit). See video.
All signs are positive that Sacramento has entered a period of slow steady growth with support from nearby Bay Area influences. Now is a great time to consider investing in multifamily housing and apartments for sale while prices are still attractive.
For more information, contact Brian Jacks (916) 837-3456, Vice President and Northern California Regional Director for East West Commercial. Brian specializes in investment sales for multifamily housing and apartments throughout the greater Sacramento area. He is also proud to announce the addition of several new commercial real estate agents in the Bay Area, serving commercial and multifamily investors, landlords and tenants in the cities of San Francisco, Walnut Creek and San Jose.
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East West Commercial – Professional commercial real estate expertise with offices in Sacramento, San Francisco, San Jose, Walnut Creek, Los Angeles, San Diego, Orange County, Riverside, and San Bernardino — commercial real estate, investment property, apartments for sale, office for sale, industrial for sale, retail shopping center for sale, 1031 exchange, commercial real estate REO’s, nationwide commercial BOV’s, nationwide commercial broker price opinion BPO’s, lender services, nationwide commercial BPO’s, asset management.
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Sacramento, CA – As one of the hardest hit regions in the country, due the housing meltdown, Sacramento area apartment owners have been welcoming displaced homeowners in droves. Apartment communities have long been the safest commercial real estate investment class, since people always need a place to live no matter how bad the economy…. but consider this next fact for even more emphasis. As of 3Q11, Sacramento metro vacancies were reported at 12.4% (retail), 12.9% (industrial), and 19.8% (office). On the other hand, Sacramento metro apartments were reported at only 5.4% vacancy during the same period… after falling from 7.1% a year prior (3Q10). Plus, due to the compressing vacancy rates, apartment owners have been able to increase rents an average of 2.2% over the past year. With all this positive news, which asset class would you prefer to own right now?
Article contributed by Brian Jacks http://www.linkedin.com/
Data Source: Marcus & Millichap 3Q11 market update http://www.marcusmillichap.com/
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Asset Management / REO Brokerage Services
For more than two decades we have provided extraordinary service to assist our clients in disposing of and purchasing real estate assets in the California marketplace. East West Commercial Real Estate specializes in assisting lenders sell their special assets / ORE across multiple asset classes: apartments, retail, office and industrial.
East West Commercial Real Estate enters northern California with a Sacramento office. The commercial real estate team in Sacramento will be managed by Brian Jacks, a veteran commercial real estate professional with with over 15 years experience. He has been a licensed real estate broker since 1996. Michael Duhs, Managing Director of East West Commercial, recently stated, “As part of our strategic expansion we are thrilled with the addition of our newest office and Brian Jack’s brings a level of expertise and professionalism that is part and parcel to East West Commercial Real Estate.” Brian Jacks, Vice President and Regional Director, will give leadership to our northern California team and expansion. His specialization in apartments for sale, shopping centers for sale, apartment loans and capital will serve the Sacramento commercial real estate marketplace well.
Brian Jacks
Vice President & Regional Director
Contact Information:
Direct (916) 837-3456 | Fax (916) 313-3778
Broker Lic. #01217349
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For professional expertise with offices in Los Angeles, San Diego, Orange County, Riverside, and San Bernardino, Sacramento, San Francisco, Oakland, San Jose — commercial real estate, investment property, apartments for sale, office for sale, industrial for sale, retail shopping center for sale, 1031 exchange, commercial real estate REO’s, nationwide commercial BOV’s, nationwide commercial broker price opinion BPO’s, lender services, nationwide commercial BPO’s or asset management, please contact Michael Duhs, Managing Director of East West Commercial, at Michael.Duhs@EastWestCommercial.com or (949) 939-8352. Visit us at http://www.EastWestCommercial.com.
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