Q4 2022 Multifamily Real Estate Report: San Jose, CA
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San Jose’s multifamily real estate market saw strong gains in average rental rates for the year but a major decrease in deliveries year-over-year.
The population of the city was 1.8 million in 2022, at a 0.56% growth rate. The unemployment rate in the city was at 2.4% by the close of the year. Due to its healthy labor market and higher-than-average median household income, San Jose is increasingly becoming one of the most desired places to live in the country.
General Area Overview & Demographics
San Jose, California is the 10th-largest city in the United States. As of 2020, approximately 40% of the population is Hispanic or Latino (of any race), 27% is White, 25% is Asian, and 6.6% is African American. The remaining 1.4% of the population claims two or more races.
San Jose, CA Median Household Income & Population
The median household income in San Jose was estimated at $99,543 in 2020. This is much higher than both the statewide and national averages. Approximately 15% of households have an income below the poverty line, while another approximately 15% earn more than $200,000 annually. The cost of living in San Jose, however, is also significantly above average.
The population of San Jose is young, with the median age estimated to be 35.8 years in 2020. This is significantly lower than the national median age of 38.7 years. Approximately 28% of residents are aged 18 to 34, while another 22% are aged 35 to 54, and 18% are aged 55 to 64.
San Jose is home to two major public universities and several smaller community colleges. The University of California-Santa Cruz, the largest university in the area, enrolls over 20,000 students each year. San Jose State University also has a large student body, with approximately 33,000 students enrolled
Major attractions in the area include the Santa Cruz Beach Boardwalk, Great America amusement park, California’s Great America Theme Park, SAP Center at San Jose, and History San José Museum. Popular attractions in the downtown area include San Pedro Square Market, the Children’s Discovery Museum of San Jose, and the Mexican Heritage Plaza.
The city has a mild climate year-round, with temperatures rarely falling below freezing or reaching extreme heat. The average summer temperature is 77°F (25°C), while the average winter temperature is 54°F (12°C). Rainfall is plentiful in the winter months but decreases significantly during the summer, making it one
Summary of San Jose Multifamily Real Estate Performance in Q4 2022
Multifamily occupancies in San Jose’s stabilized assets averaged 95.7% for 2022. Renter-by-necessity occupancy averaged 95.8%, while Lifestyle occupancy averaged slightly lower at 95.6%.
What are multifamily rents like in San Jose?
Average rents for San Jose multifamily real estate declined 0.6% over the course of Q4 2022, continuing their downward trajectory for the year.
Lifestyle segment rents averaged $3,346, while renter-by-necessity segment rents averaged $2,749.
The Western and transit-adjacent submarkets showed the highest rents for the year.
Purchase & Leasing Activity
Transaction sales for San Jose multifamily real estate reached $1.1 billion in 2022. The average price per unit was at $493,225 at the close of the year.
Sales price per multifamily unit in San Jose saw an 18.2% increase year-over-year.
Notable Multifamily Real Estate Deals in San Jose in Q4 2022
There were several notable deals for San Jose multifamily real estate that took place in Q4 2022:
- Centerra, a 347-unit property, was acquired by 3D Investments for $185 million.
- ReNew Berryessa was acquired by FPA Multifamily for $74 million.
- Santana Terrace was acquired by Zurich Alternative Asset Management for $53 million.
- Montecito property was acquired by Pacific Urban Investors for $51 million.
These are select examples among other activity.
New Multifamily Real Estate Development Activity in San Jose in Q4 2022
New multifamily completions in San Jose were down 80% year-over-year at just 1,470 units added overall in 2022. Approximately 9,600 new units were in the construction pipeline at the close of the year.
77.7% of units under construction were Lifestyle segment developments. The remaining projects were fully affordable projects or in the Renter-by-necessity segment.
Market Forecast for San Jose’s Multifamily Real Estate Market
After increasing 8.1% year-over-year in 2022, rents for San Jose multifamily real estate are expected to increase by 3.7% in 2023.
Approximately 4,000 units are expected to come online in 2023, as well.
National economic downturn will likely cause layoffs to increase and, in turn, potentially affect the multifamily market as unemployed populations seek to relocate.
Takeaways for Multifamily Real Estate Investors
Investors will likely be drawn to San Jose’s multifamily market in 2023: Demand for living space remains strong and vacancies remain very low. San Jose may be a lucrative market for developers and investors who can add supply to the city’s increasing need for housing.
Do your research, stay diligent, and happy investing.
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