Scott Safadi Market Analysis

by Scott on November 21, 2012

Scott Safadi would like to present an informal analysis of the Silicon Valley apartment market. With rents rising to the tune of double digit percentage gains each year for the past two years, we must look to the horizon to see if this is a sustainable trend and speculate as to what we can expect in the coming years. Scott Safadi has seen new construction permits for apartment projects surge in the past 12 months. What this means is that thousands of new units will be hitting the Silicon Valley market within the next 2-4 years. Scott Safadi expects the rent gains we have seen for the past couple of years to taper off as they hit the affordability glass ceiling. Affordability will becomes the limiting factor when it comes to rent gains over the next few years, unless we see a major increase in incomes. As rents flatten out in the next couple of years, thousands of new units will hit the market. There is certainly a shortage of supply in today’s market, so Scott Safadi does not believe that a flood of supply will mean too much supply. In addition, the new supply will likely not be in direct competition with the majority of 1960’s-1970’s vintage units we find throughout the Silicon Valley. These will be high price point class A units catering to a particular audience. That all being said, Scott Safadi expects to see rents flatten in the coming years, but he does not foresee any reductions in asking rents in the coming years. As the economy improves, it will continue to bolster the apartment market and Bay Area Apartment owners should continue to see blue skies.

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