Posted by Angela on April 03, 2002 at 15:47:40:
David,
Thanks for the info. Do you own any rental units? I am interested in investing in rentals here in the Bay Area, but hear it’s a challenge to get a positive cash flow.
Angela
SF Bay Area Rents decline. - Posted by David H
Posted by David H on April 03, 2002 at 15:30:50:
Note reference to axiometrics - www.axiometrics.com
–
April 2, 2002, www.bayarea.com
Posted on Tue, Apr. 02, 2002
Bay Area apartment rents continue fall
RENTERS FLEX THEIR POWER TO NEGOTIATE
By Sue McAllister
Mercury News
Average apartment rents in the Bay Area continued to fall in the first quarter of the year, though apartment complexes in some areas are slightly more full than during the last half of 2001, according to an apartment market survey.
For Santa Clara County, the average rent for all sizes of apartments this quarter was $1,542. That’s down nearly 30 percent from $2,200 a year ago, and down 5.5 percent from $1,631 in the final quarter of 2001.
At 94.1 percent, occupancy rates in the county were lower than a year ago, but slightly higher than the low of 91.5 percent recorded in the last part of 2001, according to data compiled by Axiometrics. The Dallas firm surveys apartment owners and managers quarterly.
As demand for apartments remains relatively slack, many renters are finding they have the power to negotiate for lower rent with their current landlords when their leases expire, or for price breaks with a new landlord.
``If you’re willing to go talk with them, they will and they do have the power to negotiate,‘’ said Matt Dullaghan, who has toured about 15 apartment complexes since he began looking for a new place last October.
Dullaghan, 30, a financial adviser who also works a part-time bartending job, shares a $1,500-a-month San Jose apartment with a roommate but hopes to move into his own place this summer.
He wanted to find a place with all things that matter to him – parking, in-unit laundry machines, air conditioning and a safe neighborhood – for about $1,000 a month. ``I don’t think that’s going to happen,‘’ he said this week.
Axiometrics President Ron Johnsey forecasts that rents in Santa Clara County will decline a total of about 11 percent this year, before rising about 10 percent in 2003.
Johnsey said the Oakland metropolitan area is likely to see rising rents first, followed by San Francisco. San Jose will be last, he said, because many newly built apartments have come onto the market since the economy tanked.
``San Jose has had more units delivered into that market, and just horrendous job loss,‘’ Johnsey said, which helps explain why rents have dropped more precipitously in Santa Clara County than in other parts of the Bay Area.
In the San Francisco metro area, which also encompasses properties in San Mateo and Marin counties, average rent was $1,738 this quarter, down 27.3 percent from a year ago, and down 2.9 percent from fourth quarter 2001.
The Oakland metro area, which includes large swaths of Alameda and Contra Costa counties, had an average rent of $1,364, a decline of 21 percent from a year ago and of 2.4 percent from the end of 2001.
Because average rents in the Bay Area reached their peaks in the first quarter of 2001, these year-over-year rent changes look especially dramatic. For comparison, Axiometrics data shows the average rent in Santa Clara County has now dropped to about what it was at the end of 1999.
Axiometrics found that about 73 percent of apartment managers in Santa Clara County were offering concessions this quarter – a month’s free rent, for example. Last quarter, 87 percent did so.
In San Francisco-area properties, concessions were offered 69 percent of the time; in the Oakland area, the figure was 77 percent.
Graduate student Janice Lilien wanted a place of her own. But after about three weeks of looking, she settled on a shared house in Santa Clara that she and her cat could move into for $700 a month. Lilien, who is trying to finish her master’s thesis in ergonomics and look for a job to replace the one she lost in August, said rents certainly have come down since the last time she looked for rental housing.
But not enough for me to afford my own place yet,'' she said. If I had any kind of job that paid decently I could probably get a studio for about $1,000.‘’ But that is much more than her current budget can handle.
Axiometrics surveyed 151 complexes with a total of 41,036 apartment units in the San Jose, San Francisco and Oakland metropolitan areas.
Axiometrics also released a forecast Tuesday that called the three Bay Area metropolitan areas the best large markets for apartment investors to buy into now, based on predictions of job growth and other economic factors in 2003 and 2004.
The rental market may be soft as far as developers are concerned, but rents still haven’t fallen enough to satisfy renters like Dullaghan.
Everybody says they're coming down, but when you're talking about $1,300 a month, what's the difference between $1,200 and $1,300 really?'' Dullaghan said. It’s still a potful of money.‘’
BAY AREA RENTSA survey of more than 41,000 apartment units in 151 complexes found rental rates continued to slide in the first quarter both compared with a year ago and with fourth quarter 2001. Occupancy rates were down overall from a year ago, but in the San Jose and San Francisco areas occupancy rose compared to the end of 2001.
1Q02 Chg. from Chg. from Occupancy Chg. from
County avg. rent 4Q01 1Q01 rate 1Q01
Santa Clara County $1,542 -5.5% -29.9% 94.1% -4.1
San Francisco MSA $1,738 -2.9% -27.4% 95.3% -1.1
Oakland MSA $1,364 -2.4% -21.3% 94.6% -2.3
The San Francisco Metropolitan Statistical Area (MSA) includes Marin, San Francisco and San Mateo counties. The Oakland MSA includes Alameda and Contra Costa counties. Average rents include all types of apartment units. Change in occupancy is expressed in percentage points, not percent change.
Axiometrics
Tips for Tenants
? Agreeing to a lease for a specified term will help you negotiate lower rent than if your lease is month-to-month. But remember you’ll be locked into that rate for the length of the lease, regardless of whether rates fall further, and regardless of whether you need to move for other reasons, such as a job loss.
? Even in a month-to-month lease, you may have some leverage because many landlords are afraid of the current high vacancy rates. Before approaching your current landlord, do some research so you know the prices of vacant units in your own and similar complexes.
? Decide in advance whether you are willing to move if you can’t renegotiate; once you give a 30-day notice of termination you cannot take it back without the permission of the landlord.
? Read the fine print about move-in discounts carefully. Often, you will be required to waive the discount or repay it if you do not stay in the unit for some specified period of time.
Project Sentinel
Contact Sue McAllister at smcallister@sjmercury.com or (408) 920-5833.