In the past few months, Ed Lange, executive vice president and chief operating officer at San Francisco-based BRE Properties, has been noticing an interesting trend at some of his properties. “San Francisco is beginning to stabilize,” he says. “We’re seeing the return of the one-bedroom unit. It may not visible in the Bureau of Labor Statistics' numbers, but in the Bay Area and San Jose, I think some venture capital money is being spent.”
In fact, Lange says in many properties in the Bay Area are out of one-bedroom units altogether. That’s quite a change from just six months ago when two-bedroom units were the hot item as renters doubled up. In January, the company was 94 percent occupied; now several properties in the Bay area are at 97 percent occupancy and have eliminated concessions altogether.
“In the last six weeks, there has been a big pop,” he says. “That’s a sure sign that we have below radar screen job activity that’s starting to form a nice foundation in the Bay area.”
Others are seeing a return to strength in the Bay Area as well. “The market that gives me the best feeling would be the San Francisco Bay,” says Dennis Treadaway, president of FPI Management, a Folsom, Calif.-based property manager with properties all over the state. “They, to me, have weathered this decline even better than the rest of the markets in California. They seem to be emerging quicker than the balance of the state.”
While owners and managers remain optimistic, others aren’t so sure. “You’re seeing some solid demand in the Bay Area and in the Southern California as well,” says Greg Willett, vice president of research and analysis for Carrollton, Texas-based M/PF Research. “The job numbers have been so horrible that clearly you’re not adding households. You’re shuffling people from one housing type to another. There’s some question of how long can you do that and sustain that momentum without job growth.”
Those issues grow significantly when you get to Southern California. “I have questions about job growth potential [in California],” Willet says. “A lot of economists are optimistic about those California metros, but they are so consumer-driven that, to me, it makes them really vulnerable to underperforming expectations. To me, there are a lot more question marks in California than there are in most other spots across the country.”
In fact, Willet sees Southern California as the biggest question mark in the nation. “It’s such a big share of the total stock for the country," he says. "It does impact the numbers overall when you have 15 percent to 20 percent of the total apartment base in the United States.”
Treadaway actually is seeing some surprising trends in Southern California, with the foreclosure-ridden Inland Empire outpacing Los Angeles. “Downtown Los Angeles seems to be the most challenging versus the outlaying areas of the Inland Empire,” he says. “I think the recovery is there, but it’s probably equal to the recovery we’re seeing in Northern California.”