Levin: Investors should be studying the current construction pipeline by examining the influx of new multifamily projects that have recently come on line as well as properties that are going through the entitlement process.

Johnston: Investors also need to consider the variables that will impact multifamily investments in specific regions as the Bay Area enters its ninth year of growth. For example, a major factor we are observing is the correlation between construction completions and vacancy rate increases on existing multifamily properties within a 1-mile radius during lease-up efforts. Absorption rates have slowed, and multifamily owners can expect to have renters lured from their buildings with attractive concession packages. This can greatly increase vacancy and put downward pressure on rents.

GlobeSt.com: What are some of the multifamily trends for 2018 that are shaping your strategy?

Levin: The rising interest rate environment is causing us to be more conservative, and we are carefully advising our clients in this climate. As cap rates stabilize, we are digging deeper to find value-add opportunities. They still exist; it just takes a more creative approach now that it did a few years ago.

Johnston: Multifamily trends have remained relatively consistent with the exception of interest rate volatility. We have not seen prices impacted yet, however we are only halfway through the first quarter.

GlobeSt.com: With the influx of multifamily construction in the Bay Area, do you expect supply and demand to return to balance? Why or why not?

Levin: Housing demand in the Bay Area will remain strong. Even with new deliveries, local fundamentals support continued strength in the local multifamily market. We also expect to see strong activity in B and C quality assets that can afford to price rent levels below the high levels of new class-A product. This activity will continue to support strong occupancy in multifamily product in the region.

Johnston: While we expect strong demand to continue, we do expect supply and demand to return to balance in the short term. However, the market will likely continue in an uptrend in coming years due mainly to the increase in construction cost, which has discouraged developers from starting new projects. There are a large number of rental and for-sale units that are being delivered to market in the near term, however we are seeing a slowdown in construction starts. Companies are continuing to expand in the Bay Area and home prices are continuing to increase. These are fundamentals for an excellent rental market for years to come.

The Levin Johnston team is part of Marcus & Millichap.