Moderately-Priced Apartment Community Grabs $400k/Unit Sale Price
It’s not very common to find a multi-family community in the Silicon Valley area with rent below the regional average. One such property recently changed hands, sold by the investing behemoth Blackstone to the Teacher’s Insurance and Annuity Association of America-College Retirement Equities Fund (TIAA-CREF).
While the average rent nationally is around $1,355/mo, the tenants of the Silicon Valley area have been enduring some of the highest rents in the nation – currently averaging around $2,770/mo, according to CoStar. By contrast, Terra House, a 348-unit property, located at 4501 Snell Ave in South San Jose, has an average rent of around $2,500/mo.
TIAA-CREF paid a hefty $145.2 million for the Terra House property, which amounts to approximately $400,000/unit. The property currently offers a range of unit sizes, from studio to 3-bedroom apartments. It also offers numerous amenities to residents, including on-site work out facilities, pool, and grill stations.
The property is nearly 30 years old, built in 1991, and it’s last major renovation was a decade ago, in 2009.
Give the age of the property and amount of time that has elapsed since the last renovation, it is likely a candidate for a a fresh round of updates. Such and undertaking would likely raise the average rent to be more in line with the other San Jose apartment communities.
More that 22,000 new units have been added to the multi-family housing capacity since 2012. However, many of these units are designed to appeal to the high-wage tech employees, with premium features and amenities to justify the price tag. San Jose offers few opportunities for families who need more moderately priced options.
It’s no secret that the astronomical growth of the technology industry in the Silicon Valley area has had an impact on home prices and availability of housing. Vacancy rates in San Jose are very low, around 5.2%, which is below the national average of 6%. However, this statistic may be slightly misleading, due to the constant stream of new capacity being added. That capacity is quickly absorbed by the pent-up demand.
Keystone Commercial Brokerage serves the needs of commercial real estate investors in the Santa Clara and San Mateo counties, specializing in land, multi-family, office, and industrial property. Paul Phangureh has over 18 years of experience in buying and selling in the Santa Clara and San Mateo County areas. Contact Paul at 650-924-2544, or email at [email protected]