Marin County apartment rents fell last year for the first time since the Great Recession of 2008.

Rents increased nearly 8 percent in the first half of 2015 but retreated in the second half of the year. Both Yardi Matrix and the CoStar Group, professional multifamily market survey companies, reported the fourth-quarter drops from 2 percent–3 percent for Marin County apartment rents. The countywide median two-bedroom rent saw downward adjustments from $2,557 a month as landlords with vacancies offered move in incentives and lower rents to fill vacancies.

At the same time, the county apartment vacancy rate climbed to 4.8 percent from less than 3 percent, as several southern Marin complex owners released newly refurbished apartments to the market with little response from apartment seekers.

Even though there was softness in Marin rents, out-of-area apartment investors moved in to the county and snapped up any available for-sale apartment properties as fast as they were brought to the market. More than one out of three apartment transactions took place off market and included some of the largest Marin apartment sales in 2015.

One of the largest off-market sales was for a 46-unit complex in central San Rafael at 124 Merrydale Rd. It sold for $12.7 million, or $276,000 per unit. Another off-market transaction last year was a 26-unit Mill Valley property turning over for $7.94 million, or $305,000 per unit.

As demand for apartment properties increased last year, capitalization rates were compressed, with many properties trading at 4 percent–5 percent cap rates at close of escrow. The upside for investors were the below-market rents at these properties, with some showing 30 percent under market rents.

Another market trend was the strong increase in the number of exchange buyers-as apartment equities increased throughout the Bay Area buyers became sellers and exchanged their apartment buildings using the tax deferred exchange to shelter gains and purchase larger apartment properties.

I expect to see the same strong demand for well-located apartment properties in Marin County in 2016. The expected small interest-rate adjustments from the Fed should not affect the investment real estate market in any significant way in the Marin County apartment market.

Katherine J. Higgins (katherine@khiggins.com, 415-302-7730) is a multifamily specialist and a 30-year veteran of the Marin County apartment market. She is affiliated with Paragon Real Estate Group’s Greenbrae office.