Nearly 6,400 Multifamily Units Under Construction in Silicon Valley: Is This Enough?
There is growing concern surrounding the ability to attract and retain talent in the Bay Area.
April 16, 2019
- There is growing concern surrounding the ability to attract and retain talent in the Bay Area as the labor market remains tight and the cost of living has risen to unprecedented levels.
Rents continued to increase at a steady pace through 2018. The average effective rent for the San Jose metropolitan area increased by 4.5% to nearly $2,800 per unit.
In response to elevated demand, there are approximately 6,400 units in the pipeline that should reach completion by year-end 2020.
- However, the addition of these new units may not offer much relief for renters as new supply consistently has failed to keep pace with demand. To illustrate this, an average of approximately 29,000 jobs were created each year from 2014 to 2018 compared to annual average of 3,500 multifamily units constructed in the same period.
- Although a high cost of living is of concern to the future sustainability of the area, ample job opportunities and high paying jobs should keep a large concentration of highly-skilled talent in the area that can afford to stretch their incomes enough to pay high rents. In fact, even as rents continued to climb the overall market vacancy rate remained tight at 4.2% in 2018, just 30 basis points more than a year ago.
Sources: Axiometrics, BLS, JLL Research