Report: Apartment Construction Booms Throughout Country, Slows in Bay Area

Yardi Matrix, RentCafe, San Francisco, Sacramento, Northern California, Fremont, San Mateo, Oakland, Sunnyvale, Santa Clara
Courtesy of Marteen Van Den Heuvel

By Kate Snyder

While the frantic pace of apartment construction is nationally at a 50-year high, in the San Francisco and Sacramento regions, the pace in 2022 has been noticeably slower than last year, according to RentCafe’s annual apartment construction report.

“What San Francisco has is a lack of land, like many dense, urban cities,” said Doug Ressler, manager of business intelligence at Yardi Matrix, a sister company of RentCafe.

Out of 420,000 new rentals expected to be built this year, according to the report, just over 30,000 — about seven percent of the total development pipeline — are projected to open in California alone. Much of those new developments are located in the state’s major metropolitan areas, including the San Francisco and Sacramento regions.

While the national construction level is at a half-century peak, Northern California is seeing drops in new deliveries compared to last year. According to the report, the San Francisco metro area is expecting 7,400 new units this year, a 26 percent drop compared to 2021. The city is on track to meet or possibly exceed the 1,175 units targeted for 2022, and other municipalities in the San Francisco metropolitan area contributing to the new construction activity are Fremont with 958 units, San Mateo with 824 units and Oakland with 816 new apartments.

The San Jose metropolitan area accounts for just over 3,000 of the new apartments set to come online by the end of the year – approximately half the number of units completed in 2021 and closer to the levels of construction recorded during the height of the pandemic, according to RentCafe data. San Jose has just over 1,000 rentals projected for 2022 with Sunnyvale following at 823 new units. Santa Clara is also set to add about 500 new apartments by the end of the year.

Along with the construction rate, RentCafe data shows that rental rate increases have been and will continue dropping into the next year. Ressler said while the region saw double-digit rental rate increases in 2021, at 16 percent, that rate has dropped to eight percent this year and is projected to drop even further, to four percent, next year.

“We believe the rental rate increases will not be the same as we’ve been seeing during the pandemic period,” he said.

People aged 17 to 24 want to live downtown, Ressler said, and there’s been a shift in flexibility toward co-sharing and co-living. The future could also see more office space being converted into residential space.

Recent multifamily project proposals show that despite the somewhat sluggish response compared to the rest of the country, residential development still has legs in the Bay Area.

Urban Villas LLC of Cupertino recently submitted new plans for residential development in San Jose and has increased the number of units in the project from 173 to 273 units, according to The Registry’s previous reporting. The project is located at 1530 to 1544 West San Carlos Street in San Jose and it will be changing from its original plan to develop condos to apartments.

In late September in Burlingame, the planning commission approved the application for the construction of a new five-story, 420-unit residential development with an above-grade parking garage. The project is spearheaded by developer The Hanover Company with designs from BDE Architecture and GWH Landscape Architects. The building is located at 1855-1881 North Rollins Road.

Also in September, Sares Regis Group of Northern California and Caltrain received approval from the San Mateo Planning Commission for a new apartment community called Hayward Park Transit Oriented Development to be built on 2.7 acres adjacent to the Hayward Park Caltrain Station in San Mateo. Located at 401 Concar Drive, Hayward Park TOD will contain 191 studios and one- and two-bedroom apartment homes in a five-story building. The community will also include 28 income-restricted homes.

West Coast Commercial Real Estate News