By Philip Batlin, Managing Director Investments, Marcus & Millichap. Updated October 15, 2026.
Key Takeaways
- Santa Clara County apartment vacancy is forecast to fall to 3.2% by the end of 2026, the lowest level in 25 years.
- Only about 150 new apartments will open in 2026, a 0.1% increase in inventory, but roughly 2,500 could open in 2027.
- Average effective rent is forecast to rise 4.4% to $3,441 per month.
- The average cap rate on San Jose metro apartment sales over the last 12 months was 4.8%, the second lowest in the country.
- For owners, today's tight market is likely the peak of this cycle.
Apartment owners in Santa Clara County are in an unusually strong position this year. New construction has nearly stopped, high earning renters keep coming, and vacancy is on track to fall further than in any other major U.S. market by the end of 2026.
The Numbers at a Glance (2026 Forecast)
- Vacancy: 3.2%, down 80 basis points from a year earlier
- Average effective rent: $3,441 per month, up 4.4%
- New units: about 150, a 0.1% increase in inventory
- New jobs: 13,000, up 1.1%
- Average cap rate on sales in the last 12 months: 4.8%
How Much New Apartment Supply Is Coming to Santa Clara County?
Very little this year. After more than 6,600 new units opened over the last two years, only about 150 will be delivered in 2026, mostly in Santa Clara and Los Altos. That is a 0.1% increase in total inventory. Owners should not expect this to last forever: roughly 2,500 units could come online in 2027, and vacancy may drift back toward its long term average in the mid 4% range after that.
What Is the Apartment Vacancy Rate in Santa Clara County?
Vacancy is forecast at 3.2% by year end 2026, the lowest level in 25 years. Class B and C vacancy was already 3.1% in March, and Class C vacancy in the core Silicon Valley submarkets was below 2.5%. South Sunnyvale and Cupertino, along with Mountain View, Palo Alto and Los Altos, saw vacancy fall at least 100 basis points in the past year. Santa Clara and North San Jose and Milpitas are picking up the overflow.
How Fast Are Rents Rising in San Jose and Silicon Valley?
Average effective rent is forecast to rise 4.4% in 2026 to $3,441 per month, the third fastest asking rent growth among major U.S. metros. Class A and B rents rose about 7% over the 12 months ended in March, while Class C rose about 3%.
What Are Cap Rates for Apartment Buildings in Santa Clara County?
The average cap rate on apartment sales in the San Jose metro over the last 12 months was 4.8%, the second lowest in the country after San Diego and 140 basis points below the national average. San Jose also has the highest average price per unit of any major U.S. metro.
Transaction activity rose about 40% over the 12 months ended in March. Institutional buyers came back in force, accounting for roughly 60% of dollar volume, mostly in Sunnyvale and the West San Jose and Campbell area. Deals under $10 million rose about 20%, with private investors most active in Downtown San Jose and South San Jose.
Should I Sell or Refinance My Santa Clara County Apartment Building?
That depends on your loan, your goals and your building, but the market backdrop favors owners right now. Buyers are paying for tight vacancy and steady rent growth, and with roughly 2,500 new units expected in 2027, today's very low vacancy is likely as good as it gets this cycle. Owners weighing a sale or a refinance should price both options today, while values reflect a near record tight market.
I have closed apartment sales across Santa Clara County, including 474 Matadero Avenue in Palo Alto and 2955 Neet Avenue in San Jose. If you would like to know what your building would sell for, I will put together a confidential valuation using recent comparable sales, cap rate, price per unit and GRM. You can also read how to value an apartment building in the Bay Area or see my Santa Clara County apartment sales.
Request a free, confidential valuation
About the Author
Philip Batlin is a Managing Director Investments with Marcus & Millichap in San Francisco and a member of the firm's National Multi Housing Group. He has closed more than 150 investment real estate transactions, including more than 1,000 Bay Area apartment units, and has been with Marcus & Millichap since 2009. CA DRE 01873218.
Source: Marcus & Millichap Research Services, San Jose Multifamily Market Report, 2Q 2026. Additional sources cited in the report: Bureau of Labor Statistics; CoStar Group, Inc.; Real Capital Analytics; RealPage, Inc.
