As we continue our expanded coverage of multifamily markets in 2016, we have vastly expanded the number of properties we survey by incorporating the California properties. California has by far the most multifamily properties of any state, though with a preponderance of smaller unit properties it does not have the most multifamily units. We are currently tracking the 6 major markets with over 14,000 properties with almost 1.5 million units in the Golden State.

In the last 15 years, California has finally seen more attention from the REITS and Corporate development. Of the 14,000 properties about 11,000 are what we would consider conventional but almost half of those (5300) have less than 50 units. Here’s a closer look at the 6 California markets. When reporting average occupancy and rents for markets and submarkets, we exclude Student, Senior, Military and Income Restricted properties and most properties under 50 units.

Los Angeles
Los Angeles has the most multifamily properties and units in California with over 2100 conventional apartment communities among more than 5,500 multifamily properties. We have divided the market into 36 submarkets. Overall effective rent in the market is approaching $2,000 per unit and is $2.34 per square foot. In the Downtown area, renters can expect to pay $3.00 per square foot whereas in the Lancaster/Palmdale area they can expect to pay about half that. Occupancy rates are still high but new construction has pushed down overall occupancy in several submarkets like Long Beach, North Hollywood and Downtown.

San Diego
We have demarcated 19 submarkets for the San Diego area and are currently tracking more than 2000 properties. Among conventional properties, effective rents are averaging almost $2.00 a square foot and $173 per unit. At 95.2%, overall market occupancy is close to peak occupancy, though new construction, while increasing average rents, is driving down average occupancy in submarkets like the Uptown and North Beaches area.

San Bernardino/Riverside
San Bernardino has the highest ration of conventional multifamily product of the California markets, with the average number of units per property at 132. That compares with about 100 units per property in Los Angeles and San Francisco, and averages closer to 200 in markets in Florida and Texas. San Bernardino/Riverside is divided into 14 submarkets averaging 95.3% occupancy. By California standards, rents are a much more reasonable $1.55 per square foot and $1342 per unit – comparable to markets like Austin, TX and Miami, FL.

Sacramento
Sacramento is divided into 17 submarkets with just over 1300 multifamily properties. Of those, 570 are conventional properties with more than 50 units. The average occupancy in the market for these properties is an astounding 96.6% with only 2 submarkets posting average occupancy just under 95%. Average effective rent is $1217 per unit and $1.45 per square foot, though that ranges from the mid $800’s per unit in the outlying areas to almost $1700 per unit in the Downtown area.

San Joaquin Valley
The spread out San Joaquin Valley is subdivided into 18 fairly small submarkets with 456 conventional properties and just over 64,000 units. This market is basically at full occupancy with an average of 96.7%. This is by far the most affordable market in the state with an average effective rent of $948 per unit and $1.10 per unit.

San Francisco/Oakland
The 37 submarkets that comprise the San Francisco/Oakland market contain some of the most expensive real estate in the country. Rental rates, of course, confirm this. In the 1228 conventional properties in this market average effective rent is over $2500 per unit and more than $3.00 per square foot. In submarkets like Palo Alto, the Financial District and Berkeley one can expect to pay more than $4.00 per square foot. Overall occupancy is at 93.9% in these properties but many submarkets are more than 97% occupied.

The California markets are among the priciest in the nation, but with a large concentration on new construction there in recent years – and unless absorption can maintain its pace in the next few quarters – we may be seeing peak rents in the mid-decade period for these markets.