San Francisco and Oakland are forecast to register employment growth of 1.2% and 1%, respectively, from mid-2003 to mid-2004, according to the report. Over the past 12 months, employment contracted in San Francisco by 2% and grew in Oakland by 0.6%. Along with the projected employment growth is a drop in new construction. Developers will add just 1,850 units to the San Francisco and Oakland markets in 2003, including 560 units in the West Contra Costa submarket. In 2004, another 2,350 will be added, including 366 units at the mixed-use Bay Street project in Emeryville and 300 units at The Crossings in San Bruno.
"The San Francisco and Oakland apartment markets are nearing the bottom of the cycle, as new supply is down dramatically in 2003 and the local job markets will begin to register gains by year end," comments Jeffrey Mishkin, regional manager of the firm's San Francisco office. "Over the long term, limited availability of land and sky-high home prices will lend support to property appreciation in the San Francisco and Oakland apartment markets."
As things now stand, vacancy in Oakland is 5.9% and vacancy in San Francisco is 5.8%. Those market-wide figures will stay relatively unchanged for the next 12 months, according to the report. A few submarkets, however, will continue to experience above-average vacancy, such as West Contra Costa and North San Mateo, where vacancy is currently 7.2% and 6.7%, respectively.
Average rents have declined in both Oakland and San Francisco over the past year but are expected to remain relatively flat over the next 12 months. Rents in the San Francisco region declined by 5%, to $1,647 per month, while rents in the Oakland region declined by 3.3%, to $1,198 per month.
On the investment front, the median price per unit in the Oakland MSA during the first half of 2003 was $107,916, up $4,500 from 2002, while the median price per unit in the San Francisco region increased by $16,000, to $178,554. Looking forward, properties located in high-demand areas, such as San Francisco's Marina District and Pacific Heights, will continue to command high prices and will receive offers in a short period of time, according to the report, while properties in less-desirable areas or in need of repair--and not priced accordingly--are spending much longer on the market.
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