Riverside-San Bernardino Boasts Lowest Apartment Vacancy in US

The Riverside-San Bernardino apartment market has the lowest vacancy rate in the US, according to new research from Marcus & Millichap. From July 2020 to June 2021, the vacancy rate fell 200 basis points, falling below 2%. Plus, the firm forecasts that the vacancy rate will fall another 30 basis points this year.

The strong vacancy rate supports double digit rent growth. Already, the market has the second fastest rent gain nationally, and the report anticipates rents will increase 11.2 % by the end of the year.

It is of no surprise that inward migration and population growth are driving the strong market fundamentals. According to the report, 26,300 new household were formed even has home prices in the market surged 32%. The dynamic has pushed many people into the rental apartment market. Population growth along with limited apartment supply will likely keep this the tightest apartment market in the country by the end of the year.

Limited new construction is also keeping the supply low. In July, the market had the lowest class-A vacancy rate in the nation and inventory is only expected to increase by 100 units—only .3%—this year. However, developers are responding to the demand. In the third quarter, there was an increase in new construction starts. Still, only five projects totaling 1,550 units are currently under construction in the market.

More developments are on the way. Tower 16 Capital Partners has identified the Inland Empire as a high-growth multifamily market, and is planning to build a 2,000-unit portfolio in the region over the next several years. The firm has acquired a two-property 214-unit portfolio in Colton, California, for $41 million as part of the strategy.

Tower 16 co-founder Mike Farley says that demand is continuing to grow while there is limited new supply slated for the market. The supply-demand imbalance should fuel strong rent growth over the next several years, he says.

Capital is active as well. In one example, MG Properties Group expanded its apartment portfolio in the Inland Empire with the acquisition of Victoria Arbors Apartment Homes for $137.6 million. The investor purchased the 319-unit garden-style apartment property from Sares Regis Group’s Sares Regis Multifamily Funds.