- Bay Area apartment asking rents are up 9% year over year, compared with 1.3% nationally, per CoStar data, supported by a sharp gap between new supply and absorption.
- The region delivered fewer than 2,000 units but absorbed more than 7,000, and supply is growing at roughly one-sixth the national pace.
- Life insurers are lending aggressively, as New York Life’s $105 million refinancing of Madrone Apartments shows, including credit for planned accessory dwelling units.
Bay Area multifamily rents are climbing 9% a year, nearly seven times the 1.3% national pace, GlobeSt reports, citing CoStar data.
Northmarq senior director Andrew Slaton points to supply and demand. The region added under 2,000 apartments in twelve months, while renters took more than 7,000.
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Supply Is the Story
Construction is advancing at about one-sixth the national rate. Mountain View and Los Altos show the effect, with vacancy near 3%, rents up 8.7% and roughly 225 units being built.
Those fundamentals are drawing lenders, particularly life insurers, Slaton told GlobeSt.
Madrone Refinancing
New York Life provided a $105M, five-year, interest-only loan on the 272-unit Madrone Apartments at 111 N. Rengstorff Ave. in Mountain View. Northmarq arranged it for Prometheus Real Estate Group.
The loan refinances about $90M of debt Northmarq placed in 2016. Eight new two-bedroom accessory units are planned, taking the property to 280 homes, and the lender counted that future income, which lifted proceeds.
A Rate Squeeze
Yields climbed over 50 bps between initial underwriting and the rate lock, Slaton said, which squeezed loan proceeds.
Madrone is about 96% occupied and has grown net operating income more than 20% since year-end 2023. Built in 1962, it added 134 new homes in 2014, and it sits roughly two miles from Google’s headquarters.
Zoom Out
Insurers have been active in apartments elsewhere. We covered when New York Life lent $480M to refinance 10 apartment assets.
Why It Matters
A market with little new supply and 9% rent growth is a rare bright spot as rates pressure underwriting nationally. Lenders can underwrite future income, not just in-place rent.
Capital is plentiful on the debt side, though we have also flagged a multifamily equity gap that persists despite ample debt.
What’s Next
Watch whether rent growth holds as a handful of projects deliver and whether more owners add units through ADUs.
