Multifamily Property Inventory Remains Tight

San Rafael – Marin County apartment owners saw another sharp increase in rents last year with rents, rising 12.3 percent year over year, according to data collected from the rental survey firm Real Facts of Novato.

Continued hiring in the San Francisco tech industry and a shortage of rental housing has pushed rents up in nearby counties and spilled over in to Marin County. The average asking rent is now $2,380 per month and the vacancy rate was measured at 2.6 percent at the end of the fourth quarter of 2014.

Most Marin County landlords have not kept up with the sharp rent increases and apartment sellers are behind the rental market by almost 30 percent as reflected in recent apartment sales.

For example, an 80-unit apartment complex at 965 Magnolia Ave. in Larkspur sold in June for $24 million, or $300,000 per unit, with below-market rents. The Los Angeles investment firm saw the strong added-value opportunity and closed at a 4 percent capitalization rate. The buyer plans to remodel units and bring the rental income up to market levels. With the increases, the rate of the return on net income should be 6 percent.

Apartment sales of five-15 units dominated the apartment market in Marin County last year, with average cap rates at 4.49 percent and prices per unit from $200,000-$275,000 per unit. In southern Marin communities average cap rates were even lower, at 3.4 percent and closing prices per unit at $300,000-$400,000 per unit.

Smaller Marin County complexes with four-six units saw the largest increase in prices in 2014 from the previous year. In 2013 central Marin fourplexes were trading at $950,000-$1.28 million. By 2014 the investor demand for smaller income properties pushed prices sharply up, and buildings with four-five units are now selling at $297,000-$328,000-plus per unit.

Strong demand for Marin County apartment properties with 30 percent rental upside should push apartment prices even higher in 2015.

Katherine Higgins is a San Rafael-based broker associate in the commercial division of Bradley Real Estate and is a broker associate for Realty One Group in Scottsdale, Ariz.

Source: https://www.northbaybusinessjournal.com/105800/marin-county-apartment-rents-rise-12pct-in-2014