High rents in Menlo Park, Mountain View and Palo Alto are fueling higher rents in San Jose as tech workers seek out relatively lower rents in the Bay Area’s largest city. San Jose had the largest annual growth rate in rent for a one-bedroom apartment out of the nation’s top 10 markets, jumping 15.4%, according to data from Zumper, a rental marketplace.
“San Jose is a bit more affordable than other South Bay cities but still easily accessible to big tech campuses. That has drawn more demand, putting upward pressure on rent prices in San Jose,” Zumper spokesperson Crystal Chen told the Business Times Friday. Monthly rents for one-bedroom apartments in Mountain View, Sunnyvale and Cupertino are above $3,000
In recent months, rents in Silicon Valley’s major employment centers have moved higher amid return-to-office mandates. Menlo Park, for example, saw a 35% jump in one-bedroom rents in December, Zumper said, citing Facebook parent Meta’s return-to-office policies as a key factor. “The (December) surge in rents in Menlo Park, along with double-digit annual growth rates in areas like Sunnyvale and Santa Clara, signal that the return-to-office policies of tech giants like Meta, Apple, Alphabet, etc. are really driving up demand and competition,” Chen said last month.
San Francisco retained its status as the second most expensive city, after New York’s $4,330 one-bedroom rent in February. San Francisco’s one bedroom rent slipped 0.6% in January to $3,140, while two-bedroom rent rose 0.2% to $4,220. On an annual basis, San Francisco rents for both a one- and two-bedroom apartment were up about 8%. Zumper cautioned not to read too much into the city’s dip in one-bedroom rent. “Annual rent being up over 8% continues to indicate San Francisco’s ongoing recovery,” Chen said Friday.
Popular destination cities for Bay Area residents leaving California in recent years saw annual rent declines. Austin saw one-bedroom rent drop 3.3% in February, while Atlanta was down 3.6%, Miami declined 4.2%, Nashville fell 4.8% and Durham, N.C. was down 7.6%. The falling rents may reflect in part an increased supply of apartments coming to market rather than declines in migration. The Zumper National Rent Index reported a 2.9% annual increase in median one-bedroom rent, reaching $1,525, while two-bedroom rents rose 3.7% to $1,905. Zumper cautioned that the latest consumer price index data that signals shelter inflation slowed in January is a lagging indicator and may not reflect more timely data.
“The cost of shelter CPI incorporates existing paid rents, whereas Zumper’s national rent index serves as a leading indicator, reflecting market rents today,” said Zumper CEO Anthemos Georgiades. “As a result, the annual rent increases seen in our most recent data are likely to be reflected in CPI metrics over the coming months.”
