Parts of local apartment market are approaching ‘equilibrium’

Signs of balance spread across Bakersfield’s apartment market in the first part of this year as the city’s overall vacancy rate settled slightly lower and rent adjustments went both directions, according to an update released this week.

ASU Commercial’s first-quarter summary showed little change from the fourth quarter of last year, but there were notable fluctuations: More landlords at the highest-price apartments lowered their rents than raised them, by a margin of 4-to-7, while lower-price rentals saw the opposite trend with 24 buildings increasing rents and 20 decreasing them.

The report’s author, multifamily specialist Marc A. Thurston, noted mid- and lower-price apartments in the city achieved a similar kind of balance during the last three months of last year, with 36 and 30 buildings making rent-price adjustments in opposite directions.

“In my opinion,” he wrote in an email accompanying Tuesday’s report, “this market segment is moving toward an equilibrium.”

Bakersfield’s average apartment vacancy rate has dipped 6 basis points since the end of December, landing at 2.97%, which was still higher than it has been for most of the past year.

In another highlight from the quarterly report, the city’s average rent grew 1.94% since December, led by studios’ 3.3% increase. One-bedroom units saw the lowest citywide rent growth, coming in at just 0.06%.

Bakersfield’s rental market is still outperforming Southern California’s in several respects. In the Los Angeles Basin, rents are expected to increase this year by

1.9%, according to Moody’s Analytics CRE. That forecast came earlier this year amid indications generally favorable to the region’s multifamily investors.

Average rents in the basin declined in 2023, according to a Feb. 28 update by JPMorgan Chase & Co. It included a prediction by Moody’s that the L.A. market’s vacancy rate will increase slightly this year to 4.2%.

Nationally, slowing growth in the number of new households, combined with supply surges, is expected to lead to slower rent growth than the long-term average, JPMorgan Chase reported. But it added that the strong job market and still-tight housing market conditions, together with elevated interest rates, “may also continue to keep would-be homebuyers in the rental market.”

ASU Commercial’s first-quarter report noted Bakersfield’s highest rents were to be found in the city’s northwest, where they averaged more than $1,800, followed by the western part of southwest Bakersfield, where rent averaged just under $1,600.

The lowest average rents were in central Bakersfield (less than $1,200), followed by the city’s east (slightly higher but also less than $1,200) and then its south (an even $1,200).

On average across the city, studios and lofts went for the same price per month, while two-bedroom units cost one-sixth more and three-bedroom apartments cost fully a third more than the smallest units, according to data reported by Thurston.

Occupancy varied substantially by submarket. In the northwest, the report said, apartment vacancies increased in all size categories except three-bedroom units, which ended the first quarter at 2.71%.

The western portion of southwest Bakersfield saw the opposite pattern, ASU found, with three-bedroom vacancies up, at 4.14%, and other sizes down.

At the other end of the spectrum, in central Bakersfield, three-bedroom apartments were found to be totally filled, vacancies in two-bedroom units climbed to 11.43% and one-bedroom increased to 7.14%.

Three-bedroom units were also full-up in east Bakersfield, the report said, while one-bedroom vacancies were unchanged at 5.56%.