Markets & Economy

Sleeper locales for future development: SF Bay Area submarkets

Future project starts could gain foothold in these areas of the country

Entering the second half of the year, farther submarkets of the San Francisco Bay Area and South Florida, along with select secondary markets, represent sleeper locales where developers have the ability to achieve desired yields -- making it easier to justify and finance future project starts. These submarkets and secondary locales have all experienced at least a 6 percent rise in rents spanning the past 12 months, with a number seeing double-digit rises in both rents and revenue growth. At the same time, these locales sport sub-4 percent vacancy rates and have a fairly minimal development pipeline. Additionally, a few of these markets are providing existing owners with some of the nation’s best return on investment (ROI). San Jose and San Francisco currently rank as the two top markets for job growth, but are unaffordable when comparing the proportion of annual income to median rent. This being the case, it can be assumed a number of individuals who work in these cities wil...