California Ranks High in Multifamily Research Report

California Ranks High in Multifamily Research Report
By: Nicholas A. Dunlap, CPM

Marcus & Millichap recently published it’s 2012 Real Estate Investment Research Report and the news bodes well for apartment owners in California. Despite a tough political climate and the absence of a unified, statewide apartment association to fight legislation, 4 of the top 10 or 6 of the top 20 apartment markets in the United States are located in California. The markets and their rankings are as follows: San Jose #1, San Francisco #2, Orange County #5, San Diego #6, Los Angeles #13 & rounding out the group is Oakland at #16.

The annual research report showcases amongst other things: trends in the rental market, employment market, sales trends and overall supply and demand based on newly completed units and vacancy rates in the market. Of course, property owners in California have recently lost redevelopment agencies as a source of potential funding for improvements and are again battling the threat of rent control through “inclusionary zoning”, which would require all new construction to fall under some sort of rent control. Here, Texas has it right: rent control is outlawed in the State constitution. Austin came in at 7th, Dallas at 15th, Houston at 18th and San Antonio at 21st. In my personal opinion, the Texas markets are the best places to buy at present. You can buy for cashflow and appreciation.

Right now, it is an owner’s market in California. That is, its a great place to own, but if you plan on buying in California, be prepared to pay a premium and be lucky to receive a 2 to 3% return on your investment. Better than the bank, better than the stock market, but not high enough to substantiate the physical process of investing in commercial real estate.