Bay Area Multifamily Investors Position Themselves for Success as Major Employers Plan Return to Office
While we’ve seen glimmers of the light at the end of the pandemic tunnel for several months, it finally came into clear focus over the past few months. For the most part, the most vulnerable among us have been fully vaccinated and we’ve breathed collective sigh of relief as the roll-out continues.
Naturally, it will take some time for Bay Area multifamily fundamentals to return to pre-pandemic levels as the market is still on its way to a return to ‘normalcy.’
Despite this, Levin Johnston has completed transaction activity roughly on par with 2019 this year so far, with nearly 20 transactions currently in escrow, driven by overall investor confidence in the dynamic market – which continues to rise as businesses are opening up again.
Big Tech and other major employers in Silicon Valley have announced plans to return to the office within the coming months and are moving forward with previously planned expansions, anticipating growth and robust economic development in the long term.
Many companies have come to recognize the deep value of in-person collaboration and physical locations in business hubs. While perspectives on working from home have changed and there could be lasting shifts to a more hybrid work environment, for the most part, the workforce will still be required to be – or desire to be – located within reasonable commuting distance of the Bay Area’s top employers.
Further, we anticipate that there will once again be an influx of young professionals and students to the Bay Area, including those whose initial plans to move to the region were put on hold over the past year. This will sustain and eventually drive up the demand for multifamily housing.
Smart investors are taking advantage of the current climate to best position themselves for when resident demand ramps up and vacancies tighten again. The attractive interest rate environment continues to encourage investors to look at potentially expanding and/or diversifying their portfolios.
Additionally, a couple months into a new administration, there is some sense of urgency to take advantage of current tax benefits that may face an uncertain future. Specifically, there are questions surrounding whether the 1031 exchange program will continue as-is. This is an incentive for many owners to act now, instead of taking a wait-and-see approach.
The good news is, there are seasoned brokers and wealth management specialists like Levin Johnston, who are deeply in tune with the Bay Area market and can advise owners on how to strategically position their holdings – as we continue to navigate unprecedented times.
For instance, we recently completed the sale of a suburban, 170-unit multifamily community in San Mateo County. The buyer was able to acquire an exceptional asset at an attractive basis, while the seller plans to trade into multiple properties as part of a 1031 exchange to diversify its portfolio.
This is just one example demonstrating high investor confidence in the outlook for the Bay Area multifamily market in 2021 and beyond.