Apartment construction in the Bay Area accelerated during the pandemic, reaching its highest level in five years with major new projects in Oakland, San Jose and Mountain View.
But multi-family construction in the area still lags behind most other major metros – with high real estate and labor costs, heavy regulations, and endless battles with neighborhood groups slowing or slowing down. kill projects.
The San Jose metro is expected to add 5,625 units this year, up 79% from 2020, according to an analysis by real estate data company Yardi Matrix. San Francisco and East Bay are expected to see 7,872 new apartments open in 2021, a 36% increase from the previous year. This is the largest number of apartments – 13,497 units – added to the region in the past five years.
Big jumps in housing production suggest construction is getting back on track after the initial shock of COVID-19 closures in 2020. But despite apparent crane forests and busy construction sites in major Bay Area cities , the region remains stuck in a critical housing shortage and continues to be overtaken by construction in other major cities, including economic rivals to the South and Southwest.
Doug Ressler of Yardi Matrix said the rebound in the residential rental market triggered production across the country. Part of the increase is also due to construction projects planned for 2020 but delayed by the pandemic. “It looks like the market is reborn, when it comes to the pandemic transition,” he said.
The Bay Area has fallen behind in building new apartment complexes, even as the Silicon Valley boom has attracted new workers and increased demand for rentals. The squeeze has pushed rents to their highest levels in the United States, punishing many low-income workers struggling with the economic upheavals and health crises created by the COVID-19 pandemic.
About 70% of new apartments in the Bay Area are luxurious or a cut below, Ressler said. Construction of new affordable housing has been limited, he said, and largely carried out by nonprofit developers competing for scarce government grants.
Oakland led the explosion of new apartments in the Bay Area, with the city expected to add 3,168, followed by San Jose (2,175), Mountain View (1,714), San Francisco (1,521), Fremont (1 185) and Milpitas (717), according to the analysis.
The busiest construction sites for multi-family projects are in two states popular with ex-Californians – Texas and Arizona. The Dallas-Fort Worth subway dominated the country for the fourth year in a row, on track to add 21,000 apartments this year. The metropolitan area also landed the headquarters of Charles Schwab, formerly based in San Francisco.
Phoenix is expected to add nearly 16,000 units this year, about 17% more than the Bay Area’s combined total despite a smaller population. Also leading the Bay Area – New York, Houston and Los Angeles.
The San Francisco and San Jose subways are individually behind Austin, Texas, Atlanta, Charlotte, North Carolina, Miami, Minneapolis and Orlando for new construction.
“The apartment market kind of came to a halt during the pandemic,” Wells Fargo economist Mark Vitner said. But in recent months, he said, “demand has rebounded quite quickly.”
Vitner said news of the Bay Area’s demise was premature. The region still serves as a global hub for innovation, and the talented workforce will eventually return to the offices. In the years to come, he added, “there will still be a lot of jobs created in the Bay Area.”
The demand for apartments in the Bay Area still exceeds supply, with urban rents reaching pre-pandemic levels in most places. The median price of a two-bedroom apartment in San Jose hit $ 2,720 this month, according to the Zumper ad site. A two-bedroom apartment in San Francisco rents for $ 3,830 and in Oakland for $ 2,600.
Yardi Matrix predicts that Bay Area rents will rise between 5-10% over the next 12 months, with the largest increases in San Francisco. Apartment building in parts of the area could resume, but Ressler said other areas are just easier places for developers to build.
In cities in the southwest, he said, “you can build faster and cheaper.”