[caption id="attachment_50698" align="alignleft" width="180" caption="Scott Gerber"][/caption]
The Sonoma County apartment market gained momentum in 2011. In terms of actual performance of properties, number of sales and pricing, apartments returned to the spotlight locally and nationally with big gains in most markets.
In a nutshell:Rents grew by 2 percent to 3 percent.Occupancy stabilized at 97 percent.Number of sales for properties with more than six units grew from 10 to 16.Dollar volume of apartment sales doubled from $66.5 million to $125 million.
While Sonoma County's rental market is not uniform, occupancy held ground at 97 percent. There was stronger performance in the southern part of the county (2.4 percent vacancy or less) and a more challenging market in Santa Rosa (3.6 percent vacancy).
My prediction of 3 percent to 6 percent rent growth for 2011 proved to be a bit optimistic in light of the struggling economy. Actual growth was more in the 3 percent range.
Going forward, I expect Sonoma County apartment rents to grow 3 percent to 6 percent in 2012 with stronger growth and occupancy in the southern part of the county related to a greater number of San Francisco job holders commuting in from Sonoma County.
Evidenced by growing number of closed transaction in 2011, the apartment segment continues to be the industry darling and some of that good news has reached Sonoma County.
One transaction that accounted for $68 million was the recent sale of the Enclave at Adobe Creek. After purchasing the 492-unit Petaluma complex in October 2009 for $52 million, the selling entity added approximately $1 million in capital improvements and sold the property to a bullish investor. An asset manager for the buying party is quoted as saying, "Rents have only one direction to go."
Pent-up rental demand portending rent growth for the foreseeable future, all-time low fixed-interest rates in the 4 percent range and willing lenders eager to make loans are putting apartment investors in a good frame of mind heading into 2012. To quote an acquisitions director for a regional real estate investment trust, "We have plenty of money for apartment deals, we just need more inventory."