Job Growth Drives Rent in Silicon Valley
New data released by real estate information tracker Axiometrics showed that apartment rent grew to 4.1% in August buoyed by the improving employment condition in the U.S. The increase was the highest recorded in two years, the report said.
According to Axiometrics, California, particularly in Silicon Valley, posted the highest growth, followed by Oakland with an 11.2% annual effective rent hike last month. San Jose was third at , at 10.2% rate hike.
Silicon Valley recorded the strongest apartment market in the U.S. as home to three metro areas with especially high effective rent growth: Oakland, San Jose and San Francisco.
Axiometrics added that this year is proving to be the most robust for the real estate sector since the 2008 global financial market crash as 2014 recorded the highest year-to-date effective rent growth nationally, at 5.5% through last month.
Unlike "asking rent," the term "effective rent" factors in concessions and perks that landlords give tenants.
New York City posted the highest average asking rent for the year to date at $3,187, according to a report by commercial real estate services firm Cassidy Turley. San Francisco came next at $2,171.
That report put San Jose as the metro with the lowest vacancy rate this year, 2.5%. San Diego was 2.6% and Oakland 2.7%. Tied at 2.8% were the California locales of Orange County and Sacramento, along with New York City and Minneapolis.
More jobs are being added as the U.S. economy recovers, helping out the apartment market, as executives of multifamily property REITs have mentioned lately.
"Demand for apartments remain strong," Post Properties CEO David Stockert said on a second quarter earnings conference call with analysts last month. "Better job growth and a still-weak first-time-homebuyer market support favorable conditions even in the face of new supply."
The real estate investment trust raised its outlook, and Stockert noted that rent growth was up as was average occupancy, setting up the portfolio well for the second half of the year.
A separate report echoed the findings of Axiometrics as improvement in employment is expected to boost the domestic real estate segment in the U.S. realtors said and added that job growth, which is the key to overall economic health, has essentially recovered all of the eight million jobs lost since the great recession.
Employment is expected to improve, with job growth rising 1.6 percent in 2014 and 1.9 percent next year, after growing 1.7 percent in 2013; consumer confidence should gradually rise.
The Gross Domestic Product should grow 2.2 percent this year and about 2.9 percent in 2015; GDP grew 1.9 percent in 2013. Inflation, as measured by the Consumer Price Index, was a tame 1.4 percent in 2013 but is projected to rise to 2.5 percent this year and 3.5 percent in 2015.
Eric Belsky, managing director of the Joint Center for Housing Studies at Harvard University, agreed we’re unlikely to see a back-up in GDP. “Growth in the stock market and the recovery in housing along with pent-up demand are major factors driving the economy,” he said.
“There are three federal surveys that measure household growth and that are inconsistent, but we had real growth in 2012 that fell back last year,” Belsky said. “Even the survey with the strongest household growth shows we’re a million below where we should be, but we’re probably two million below. We could see a notable uptick in household formation later this year.”
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The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.