California’s South Bay multifamily market, which includes San Jose and Silicon Valley, continues to experience moderate year-over-year rent growth of 0.4% and tight vacancy rates that are expected to stay under 4%, according to Yardi Matrix.
“Overall, San Jose’s multifamily market is characterized by steady growth and high demand,” says Doug Ressler, manager of business intelligence at Yardi Matrix. “San Jose’s labor market is recovering strongly, with major employers like Google and Amazon expected to expand their workforce in 2026.”Ressler adds that a surge of return-to-office mandates has led to an increase in demand for apartments in the market.
“Companies like Zoom and Adobe have implemented policies requiring employees to work in the office for a minimum of three days per week,” he says. “This has driven more people to seek housing closer to their workplaces.”
He notes that with hybrid work schedules becoming more common, renters are prioritizing homes that offer convenient commutes and amenities that support remote work.
Other positives include a steady annual growth in median household income, projected at 3.2% this year, and the labor market recovering strongly from the job losses it experienced in 2023.
Just over 3,000 units are planned to come online in the market in 2025, which is 2.09% of its overall multifamily stock. Looking ahead, Yardi Matrix forecasts an additional 2,595 units in 2026 and nearly 2,000 in 2027.
The key developments planned include the Google Downtown West project, which will span 80 acres around San Jose’s Diridon Station and feature office spaces, residential units, retail areas, and public parks. In addition, San Jose is focusing on creating urban villages that combine residential and job-based developments with access to transit in several areas, including Santana Row and Valley Fair shopping and dining destinations; Stevens Creek Boulevard; and Winchester Boulevard.
Ressler, however, says there are several areas of concern to watch when it comes to the South Bay market, starting with affordability and a supply and demand imbalance.
“With the advertising asking rent over $3,000, affordability remains a significant issue for many residents. High living costs can limit the pool of potential renters and may lead to increased demand for more affordable housing options,” he notes. “And while there are several new developments planned, there is a risk of supply not keeping pace with demand, especially in high-demand areas like north Sunnyvale and Santa Clara. This could exacerbate the already low vacancy rates.”
He also notes development in the market could be hampered by regulatory hurdles and high construction costs. In addition, the market’s economy is heavily reliant on the tech industry, and any future downturns or slowdowns could impact the multifamily market significantly.
“These factors could pose challenges to both renters and investors in the San Jose multifamily market,” Ressler states.
