A new report from Institutional Property Advisors (IPA), a division of Marcus & Millichap, is making the case for the strength of the multifamily market in the San Francisco Bay Area.

“There is a solid case to be made for the investment appeal and performance potential of the San Francisco Bay Area’s multifamily sector despite news narratives that emphasize the area’s economic challenges,” said Greg Willett, first vice president and national director, research services, at IPA. “Key indicators pointing to a strong multifamily market in the Bay Area include employment that exceeds the pre-pandemic level, exorbitant single-family home prices, and the limited supply of new apartments.”

According to IPA, the market’s economic resiliency, high for-sale housing costs, and limited apartment construction are the three key factors for why the need for multifamily rentals is growing.

The report findings reveal:

  • Employment across the San Francisco, East Bay, and South Bay metro areas is 50,000 positions ahead of the early 2020 pre-pandemic count, nearing 3.6 million jobs;
  • When it comes to the rent-versus-buy spread in the Bay Area, the gap is staggering. While the national premium to buy a median-priced single-family versus rent the average apartment is at a record $1,291 per month, it exceeds $4,800 per month in the East Bay and $9,200 per month in San Francisco and the South Bay; and
  • While many markets across the nation are seeing a wave of new multifamily units being delivered, the Bay Area continues to see apartment shortages. Regionally, 17,400 units are under construction going into 2023’s final quarter and will yield inventory growth of just 2.6%. This is only half the 5.2% expansion that is on its way nationally. In addition, local starts have come to a near standstill during recent months.

“Northern California’s strong concentration of high-paying jobs underscores the importance of the region’s technology sector and ability to attract venture capital,” added John Sebree, senior vice president and national director of the firm’s Multi Housing Division. “With innovation as one of the area’s great strengths, the Bay Area should account for a significant share of job creation drive by new artificial intelligence capabilities.”