Marin County apartments: Prices increase, rents soften for multifamily complexes

2016 was a strong year for apartment sales in Marin County, with multiple offers the norm for both five-plus-unit complexes and smaller, two- to four-unit properties.

Both categories saw year-over-year price increases, with some southern Marin prime apartment properties selling at over $500,000 per unit. In central and northern Marin cities, prices are now $201,000–$409,000 per unit, depending on location and amenities. The majority of central Marin prices is currently around $300,000 per unit.

Smaller properties also received price increases in 2016. Southern Marin fourplexes sold for as high as $3.55 million. Duplexes in both Tiburon and Sausalito are now selling for $1.8 million–$2.3 million. Just two years ago, the same-sized duplexes were selling for $1.4 million–$2.0 million.

COMPETITION FROM OWNER-OCCUPANTS

As housing prices increase, home buyers are looking for two- to three-unit properties to owner-occupy to reduce their ownership costs. This is pushing prices up for smaller Marin income properties.

Capitalization rates for five-plus-unit properties ranged from 2.69 percent for complexes with 30 percent upside in rents to around 4 percent for apartment properties that sold with rents near or at current market rents.

All-cash buyers continue to dominate the Marin apartment market, as investors search for quality locations with rental upside.

RENTS SOFTEN

At the same time apartment sales were strong, southern Marin apartment rental rates continued to soften as more new apartments and condos came to market in San Francisco. Southern Marin two-bedroom luxury apartments that were renting for over $4,000 per month in the past two years are now renting for around $3,400–$3,600.

In central and northern Marin, the cheapest one-bedroom apartment is $1,600 per month. Two-bedroom apartments were being offered at around $1,950–$2,250.

As rents soften, Marin apartment property pricing will stabilize, but I don’t expect to see that happening in 2017. Interest rates are still relatively low, and demand for housing continues to dominate the North Bay.

Katherine J. Higgins (marinapartmentinvestments.com) is a broker associate at Bradley Commercial Real Estate in San Rafael. She has worked the Marin County apartment market for 30 years.