Misora, which just finished completion at Santana Row in June, consists of 212 units, which range from $1,875 to more than $9,000. The project, part of 615 rental units at Santana Row, is nearly fully leased. Overall, the entire Santana Row rental portfolio is 97 percent leased.
If you thought apartment rents in Silicon Valley, already sky-high, had reached their limit, well… think again.
Santa Clara County monthly rents soared on average $124 in the second quarter compared to the first three months of the year, according to the latest numbers from apartment tracker RealFacts, released today. They’re up 9 percent year over year.
“It’s summer fever,” said Nick Grotjahn of RealFacts, based in Marin County. “The only thing that can pay for these rents is the high-tech employment. That’s the driving force behind these rents that are north of $2,000 a month.”
The latest numbers are notable because average rents had been showing slow, steady quarterly increases of $30 to $50. They have not zoomed up by this much in the past couple of years.
The rent growth seemed so aggressive that I reached out to Axiometrics, another respected apartment data tracker, to see if they’re showing similar increases. The firm said effective rents in the San Jose metro area jumped $100 a month in the second quarter.
That’s less of an increase than RealFacts’ data, but the firm also showed accelerating increases. Ross Coulter, a spokesman for Axiometrics, said that most of the rent growth in the last year came from the April through June period.
According to RealFacts, the average apartment rent for all unit types was $2,321 in Santa Clara County, compared to $2,197 in Q1 and $2,128 a year ago.
In San Mateo County, the average was $2,470, up $110 from the previous quarter. That compares to $2,284 a year ago, an 8.1 percent increase.
Grotjahn said that the latest figures represent the highest rents ever for the area, but they are not adjusted for inflation.
It’s the region’s jobs engine that is pushing the rents higher, said Lawrence A. Souza, an economist and principal with Johnson Souza Group Inc. He noted that the San Jose metro area has added 72,000 jobs in the last two years — a growth rate that would require 12,500 new units to come online just to keep up with the additional demand.
“That’s basically dot-com levels,” Souza said. “This is ’98, ’99, 2000 all over again. Santa Clara County is now one of the top destinations for in-migration and population growth.”
RealFacts shows that 12 communities, totaling 3,996 units, were built and delivered starting in 2013 in Santa Clara County. That compares to 3,139 for the four years prior.
But despite the additional construction, occupancy remained very high in Q2 — a sign that all additional units coming online are being quickly snapped up by renters. Normally, additional properties would result in a dip in occupancy. But Santa Clara County saw occupancy increase to 96 percent, up from 94.1 percent in the first quarter.
At Santana Row, San Jose’s marquee mixed-use project from Federal Realty Investment Trust, construction just wrapped up in June on the final phase of 212-unit luxury project called Misora. It’s now 95 percent leased at very strong rents.
“We’re beating all of our occupancy goals by far,” said Collette Navarette, director of marketing for Santana Row. “We did not think that, upon completion of the (final) building at the end of June, we would only have eight units left.”
Rents range from $1,875 for a studio to $9,065 for the highest-end loft. The pricey figure buys you access to amenities like multiple pools, a wine-tasting room, fireplace room, lounges and a swanky fitness center. ( Take a peek inside these apartments).
“I think it’s all the amenities,” Navarette said. “What we’re seeing most in terms of demand is for our one bedrooms. It’s a lot of Silicon Valley single employees. We also have a lot of empty nesters that are renting our higher-priced units.”
The countywide average is for all unit types. For one bedrooms, the average was $2,082, up from $1,978 and the first time I can find record of the county average crossing the $2,000 threshold for one bedroom units.
One bedrooms in Palo Alto will set you back $2,802 (up $144 from Q1); Mountain View, $2,381 (up $152); Sunnyvale, $2,095 (up $120); and San Jose, $1,945 (up $77).
Souza added a caveat to the second-quarter numbers, noting that the period from April through the summer is traditionally peak renting season. He said it was unlikely future quarters would see growth like the second quarter.
“At some point, there will be a limit and the acceleration will start to slow down,” he said.
“I don’t think you can raise it $400 in a year,” he said. “There’s going to be a tipping point. I don’t believe $124 in a quarter, which equates to $500 a year, I don’t think that’s sustainable.”
There is some risk for landlords if they push rents too high because it could spur calls for rent control ordinances.
High rents also push developers to respond by pushing new projects.
But for now, many renters with tech-industry paychecks appear willing to pay the high cost of admission for living here.
“They’re not going to complain — they just need housing,” Souza said. “They’re willing to double up and triple up. If you’re making $100,000 and you’re doubling up, that’s gross income of $200,000 of household income. You can spend $6,000 a unit.”