An apartment complex in Downtown Oakland has changed hands in a deal that appears to reflect the Bay Area’s lagging performance on rent-growth during the pandemic.
The 93-unit La Peralta apartments sold for $18.5 million––about $198,000 a unit, not including five ground-floor commercial spaces. The buyer and seller have not yet been publicly disclosed, according to Tim Warren, a senior vice president of NAI NorCal, which represented both sides.
The complex has significant vacancies, with 14 residential and two commercial units unoccupied. Its residential units range from studios to three bedrooms, prices from about $800 to $3,000 a month. Approximately 40 percent of the units have been renovated, and there is a BART station about a half mile away.
Oakland has seen a 10.3 percent gain in rents over the past year or so, getting back to pre-pandemic levels, but still trails other major markets. Southern California has seen a gain of more than 20 percent since the pandemic started. The recent sale of a 300-unit apartment complex in Carson, a largely working-to-middle-class city in the South Bay section of Los Angeles County, sold for $570,00 per unit unit.
Another likely factor in the relatively low price for the 77,000-square-foot La Peralta is that it is subject to rent control, with annual increases in rent tied to the local consumer price index.
Oakland’s rent control requirements “puts a cap on sales in the city” and La Peralta was about average for the current market.
Oakland’s rent-control law recently saw a change-up when city officials decided to back away from allowing a six percent annual rent hike based on the local consumer price index, although it came after the deal for the La Peralta apartments was in motion. In any case, the move to cap this year’s rent increase at three percent for existing tenants had landlords crying foul over the effects on inflation that’s been running well ahead of that mark.
“It’s an uphill battle for landlords,” NAI’s Warren told The Real Deal. “If you’re only able to increase rent by three percent, it’s just not going to keep up with inflation.”
There may be some relief coming soon, because downtown Oakland is experiencing a rebound in occupancy rates for apartments for the first time since the beginning of the pandemic. The vacancy rate for Oakland was down to 2.5 which was the lowest since 2000, according to a Q2 report by Marcus and Millichap.
“There was a dip in vacancy number, especially in the downtown area, but it’s rebounded very nicely and things are really turned around in a small period of time,” said Warren.
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