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Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
Courtesy: Paragon Real Estate Group
One of the most important factors that always has driven San Francisco rents higher than other American cities is scarce inventory.
“San Francisco is very much a boutique market of smaller buildings,” says Paragon Real Estate Group in its third quarter S.F. Bay Area Apartment Market Report. And indeed, the vast majority of multi-units sold this year are 5-12 units. Such low volume doesn’t exactly flood the area with available units. Prices, then, stay high, and indeed get much higher as demand grows. As seen in the gallery above, the Bay Area is a heavily populated area, and growing more so, as the income and employment rates also grow.
Another factor influencing rents is rent control. Though readers will differ (vociferously) on whether said control helps or hurts tenants in the rental marketplace, the fact remains that these ordinances must have some pressure on overall rents, simply for the fact that so many of San Francisco’s apartment buildings are subject to them.
“Our residential investment stock is much older than most cities,” says Paragon. “Eighty-two percent of the city’s multi-units were built prior to 1935 — and over 50% are of pre-1920 vintage.” By this third quarter of 2015, “18% of apartment building sales were of buildings constructed between 1950 and 1978 and none thereafter. All are subject to the S.F. Rent Control Ordinance, which covers building constructed prior to 1979.”
Building values appreciating along with appreciating rent
Multi-units, for those who buy and sell them in San Francisco, have proven themselves to be excellent investments, as evidenced in the gallery above. Sellers of such properties enjoy now-record appreciation; but also, owners, too, are enjoying record returns. Paragon’s data shows the values of San Francisco apartment buildings appreciating far beyond the annual compound appreciation inflation rate over the past 21 years. “Adding the huge appreciation in rents, the various tax advantages of rental property ownership and the recent availability of extremely low-interest-rate financing, have made such properties very good investments indeed.”
Unsurprisingly, the value of such buildings per square-foot has shot up, almost doubling since 2003 in San Francisco County and rising from $174 to $227 in Alameda County in the same period.
Rents: way, way up
Apartment buildings can appreciate in value primarily because rent has shot through the roof. We’re all aware of recent increases pushing the Bay Area rental market into the stratosphere (and San Francisco into first place as the most expensive city in the U.S.), but Paragon’s figures are still startling. Since 2010, San Francisco rents have increased 61%. And Oakland? You might want to sit down for this: up 91%.
What’s to come?
New laws in San Francisco on eviction and the Ellis Act relocation procedures recently passed and will impact the local market. Twitter’s recent lay-offs also may be a sign of shift. We’ll revisit this topic more in future blogs. In the meantime, though, it’s been quite a banner year for landlords in the Bay Area, especially in San Francisco.
Anna Marie Erwert writes from both the renter and new buyer perspective, having (finally) achieved both statuses. She focuses on national real estate trends, specializing in the San Francisco Bay Area and Pacific Northwest. Follow Anna on Twitter: @AnnaMarieErwert
Article source: http://blog.sfgate.com/ontheblock/2015/10/22/despite-rent-control-s-f-apartment-buildings-prove-solid-gold-investments/
