As we continue to grapple with the unprecedented pandemic and enter an election season that seems to become more turbulent by the day, one thing has remained certain: Bay Area multifamily real estate is one of the strongest investment options in the country.
While elevated uncertainty has caused some investors to sideline, the most astute have recognized that this period of slowed activity and record-low interest rates
is actually ripe with new opportunities for growth if you know where to look – and have trusted advisers on your side.
After closing out 2019 with more than 70 transactions totaling over $600 million, there is no denying that our team has had to put in even more time, effort, and strategic thinking to close deals and keep the momentum going amidst COVID-19 and social distancing orders.
To reach a total 2020 transaction volume of nearly $300 million to date, it has been critical we not only ensure our clients stay active in the market, but that they take advantage of opportunities they would not have otherwise had to grow and sustain wealth.
Like DeChambeau winning the U.S. Open by six strokes, Levin Johnston will continue to navigate – and lead – the market into 2021 and beyond.
Bay Area Multifamily Continues to Pull Ahead
These challenging past several months have instilled a stronger sense of investor confidence in multifamily over other real estate product types. Not only has the sector experienced the smallest dip in rent payments, but the tax benefits are also tough to compete with.
In the Bay Area, we’ve naturally seen a continuation of the trend of migration from the city to the nearby suburbs – for some, the pandemic was the catalyst to finally make this move.
So while San Francisco has experienced a significant market correction, the Peninsula cities, Silicon Valley, and East Bay markets are seeing strong occupancy and rental rates. Specifically, spacious, garden-style, B- and C-class properties have maintained some of the highest occupancies and lowest delinquencies in the region.
Within these markets, you’ll find core multifamily assets that have some of the most reliable yields that just aren’t available in stocks and bonds – and chances to make significant value-add plays.
That said, to secure top assets and identify the most substantial growth opportunities, it is important to be one of the first to know what is available. This is only guaranteed through relationships like the ones our team has built over the past several years of specializing in this market.
This can also be a challenging time as a seller looking to meet or exceed projected returns and achieve the sale price their assets deserve.
For example, we recently worked with a multifamily owner with several properties in the Bay Area. The firm had enlisted another brokerage team that had unsuccessfully marketed an apartment community in San Leandro for six months.
Through leveraging our network and effectively communicating the asset’s strength, Levin Johnston was able to secure a buyer in just one week.
Looking Ahead to Growth Potential
As we head into Q4, there is finally an overall sense that the pandemic will end sooner rather than later.
With the cost of capital remaining historically low, we’re advising our clients to consider building their multifamily portfolios through acquiring assets to hold over the next 5 to 10 years. This will situate them well as the market recovers and flourishes, due to continued resident demand in one of the largest employment hubs in the country.
Now is also an ideal time to complete 1031 exchange transactions. Through benefiting from the tax savings while trading into more units, investors will position themselves for more prosperity down the road.
We advise our hesitant clients to reflect on the past – where they’ll see that well-capitalized, savvy investors can leverage the opportunities that a downturn provides and make a killing.