Bay Area cities are hot again, if applications from Gen Z tenants are any indication.
The San Francisco and San Jose metros have been two of the fastest growing destinations for college-age and post-grad transplants in the United States in recent months, according to real estate consulting firm Yardi Matrix.
Interest among 17 to 25 year olds in San Francisco and East Bay apartments has doubled between 2020 and 2021, the fastest increase in the United States. Applications from students and young professionals jumped 50% in San Jose during the same period. Most of the growth came in the last six months of 2021 as COVID-19 restrictions eased.
“What we’re seeing is pullback,” said Doug Ressler, principal analyst at Yardi Matrix. “The San Francisco Bay Area has just seen significant growth in tenant numbers, especially Gen Z tenants.”
Bay Area rents plummeted in the first year of the COVID-19 pandemic as offices closed or people worked in skeletal shifts and remote work took hold. Many young tenants decamped to family homes, remote towns and rural towns, in search of cheaper rents and a different way of life.
High-end apartment complexes in San Jose, San Francisco, Oakland and Silicon Valley offered deep discounts and incentives to win tenants. Apartment prices have fallen, especially in luxury buildings.
But pre-pandemic rents have returned in many cities. The median price of a two-bedroom apartment in San Jose rose 14% year-over-year in February to $2,491, 2% in Oakland to $1,930 and 15% to $2,710 in San Francisco, according to Apartment List. The median rent in the United States has increased by nearly 18% over the past year.
East Bay homeowners have seen requests increase recently, said Krista Gulbransen, executive director of the Berkeley Property Owners Association. But declining international student numbers due to pandemic restrictions have opened up more vacancies around UC Berkeley, she said.
Market prices in many neighborhoods have not returned to pre-pandemic levels. It could take three years to see a full recovery, Gulbransen said. ” To resume ? Yes,” she said. “Robust? Not yet.”
Home ownership is generally less vital for young professionals than for older generations. A recent survey by Apartment List found that Gen Z respondents were half as likely as baby boomers to say homeownership was extremely important to their personal success. The survey’s authors believe that Gen Z renters may change their attitude towards homeownership over time.
Rob Warnock of Apartment List said the survey did not reveal a drastic cultural shift in feelings towards property. On the contrary, he said, younger generations are being pushed to rent because concocting a down payment and buying a house is too expensive for many.
“More tenants expect to rent longer, if not indefinitely,” Warnock said. “The vast majority of this is affordable.”
Even millennials have been more ambivalent about buying a home than their parents and grandparents, the survey found.
Millennials, typically between the ages of 26 and 40, are primarily responsible for the growing demand in the real estate market. But the Apartment List survey also found them much less likely than older generations to place high value on property.
Rental demand in the Bay Area has been driven by returning students and young professionals, Ressler said. Demand began to increase when colleges and universities reopened for in-person classes and has been increasing ever since. The most popular apartments are older, larger and less expensive units, ideal for having roommates.
The Yardi Matrix survey analyzed over 3 million rental applications across the United States and screened multiple submissions from unique applicants. San Francisco saw the largest increase in young renters in 2021, with about double the previous year’s total. Jersey City, NJ, saw a 95% increase, followed by growth in Manhattan (63%), Philadelphia (61%), Boston (59%), Arlington, Virginia, (55%) and San Jose (52 %).
Part of the growth in the number of young tenants looking for new apartments in the city is due to the impact of COVID-19 on employment and education plans, the survey notes. Unemployment has hit young workers in the service sector hard, among other jobs.
But colleges and universities have reopened, tech companies are bringing workers back to the office, and restrictions are being lifted on stores, bars, restaurants, theaters and clubs, breathing new life into Bay Area cities.
Ressler expects Gen Z demand to pick up in May and June. “They love cities,” he says. “They want to come back”
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