Rents take a breather as techies go mobile
Chuck Hattemer broke his lease in San Jose for temporary and remote shelter during the pandemic.
Hattemer, the co-founder of property management startup Onerent, returned to his parents in San Diego for a rent-free stay.
Last month, Hattemer and his girlfriend, Michelle Lovato, drove to Seattle to live with an aunt and uncle for a few more weeks. On the way, he said, they camped and met several other couples taking the same approach to remote work — heavily emphasizing “remote.”
“A lot of people were on the same journey,” Hattemer said from Seattle. “A lot of people are going remote.”
Moves like Hattemer’s have contributed to some — but not all — of the sharp ups and downs of rents in core Bay Area cities during the COVID-19 pandemic, real estate experts say.
Prices for one-bedrooms in techie hives near major Silicon Valley companies have plummeted from last July: San Francisco fell 11.8%, Mountain View dropped 15.1%, Menlo Park fell 13.5%, San Jose slid 8% and Cupertino 15.7%, according to rental website Zumper.
One-bedroom leases in cities with historically cheaper rents and larger spaces have seen rising prices: Oakland jumped 4.5%, Walnut Creek edged up 1.3% and Concord rose 2.3%, according to Zumper data.
Despite anecdotes about techie friends breaking leases or ditching roommates in San Francisco to hang out in Tahoe, hiking and rock climbing between Zoom calls, economists doubt lifestyle changes are the only reason behind plummeting prices.
Two other big forces have changed the supply-and-demand equation in the housing-short Bay Area: owners of short-term rentals, including Airbnb vacation stops and furnished corporate housing, are now listing those units as longterm rentals, adding new supply. And surveys and interviews suggest many renters are taking shelterin-place seriously and extending their leases rather than risking a move, quelling demand. The increased supply and falling demand have pushed down prices.
Remote work has made it easier for techies and Silicon Valley professionals to dump roommates, break leases and move to cheaper, bigger apartments in distant suburbs or indulge in lifestyle makeovers.
Migration caused by the boom in remote work is “a real trend,” said Chris Salviati, housing economist at Apartment List. “But I don’t think it’s the main driver of the trend” of lower rents.
A national survey by Apartment List in June found 17% of renters more likely to move this year because of the pandemic, while 30% were less likely to move. Renters said their top reason for staying put was feeling it was unsafe to move during the pandemic.
About 1 in 3 renters said they were more likely to move because they needed to save money and find something cheaper, while only 1 in 5 said they planned to work remotely.
Anth Georgiades, CEO of Zumper, believes the rent turbulence is largely due to a migration known as “The Brooklyn Effect.” The hypothesis: The Bay Area is experiencing a shift in rental habits much like New York City has undergone in recent years. Manhattan residents have given up their small, pricey apartments for cheaper, larger flats in Brooklyn, driving up rents in their new neighborhoods.
In the Bay Area, Georgiades believes the Zumper data shows a connection between falling demand in tech hubs like San Francisco, Menlo Park and Mountain View, and rising demand and prices in Oakland and throughout the East Bay. Higher prices in outlying suburbs suggest renters are looking for more space and are less concerned about a daily commute as remote work becomes more accepted.
Several major tech companies have told employees to expect work-fromhome to be a larger part of their culture even after pandemic restrictions are lifted. Facebook expects as many as half of its employees to switch to remote work during the next decade. Twitter CEO Jack Dorsey told workers most could clock in from home permanently. Google is still working out its plans.
“The story is not apocalyptic — everyone is not leaving the Bay Area,” Georgiades said. Zumper has seen website search traffic grow to record levels, suggesting a still robust demand for apartments.
Onerent has seen a shift in demand for its services, Hattemer said. The San Jose-based startup manages about 1,500 residential properties, mainly single-family homes, in several Western states.
The company has seen a few major changes during the pandemic in renter behavior, Hattemer said. In June 2019, about 35% of tenants in the Onerent portfolio renewed their leases. A year later, about 85% of tenants signed up for an extension on their current lease. “I think people are just hunkering down,” he said.
Onerent also has seen an influx of short-term rentals — converted Airbnb rooms and corporate housing — reach the platform during the pandemic. Hattemer said conversions from short-term to long-term rentals typically made up less than 10% of Onerent’s new business, but recently have been about one-third of new listings.
The pandemic has diminished leisure and work travel, forcing Airbnb to lay off one-quarter of its workforce in May and postpone plans for a public offering.
On a personal side, Hattemer sees the value in spending more time with family, saving money and working wherever he can find a quiet spot and Wi-fi. But at some point, he wants to cut back on the video conferences and see his friends and colleagues face to face.
Even the startup’s small office, he said, he misses.