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Bay Area among pricey rental markets

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08-16-2006

by Eve Mitchell, Business Writer, The Oakland tribune

The Bay Area is home to three of the 15 most expensive rental markets in the United States, according to a Forbes.com list of the country's priciest rental markets. The San Francisco metropolitan area, which includes San Mateo County, is No. 3, followed by the San Jose metro area in 11th place. The East Bay is ranked 13th.

The Forbes report was based on data compiled by San Francisco-based Global Real Analytics. To arrive at the most expensive rental markets, the company figured out what the average square-foot rent was for studios to three-bedroom apartments. The data are drawn from buildings that have 50 units or more and were built or renovated in the last 26 years.

The average square-foot cost for newer apartments in the San Francisco metro region in the second quarter was $27.17, which works out to $2,717 for a 1,000-square-foot apartment, or 7.2 percent higher than a year earlier. In the East Bay, $19.01 was the average square-foot cost for a newer apartment, or $1,910 for a 1,000-square-foot apartment - 7.6 percent higher than a year ago. Manhattan had the highest square-foot average of $48.33.

Demand for rental properties, the higher prices paid by investors for rental and higher maintenance costs are driving up the square-foot cost of apartments, said Hubert Bromma, chief executive of Oakland-based The Entrust Group.

"We have increased jobs in the Bay Area. That's a big factor," he said. "The other thing is that real estate investors have a larger debt burden and they pass it on to consumers."

Bromma expects rents to continue to climb, with more people opting to rent instead of trying to buy a house in the Bay Area's expensive housing market.

The latest report by Novato-based RealFacts showed rents climbed in the second quarter. The Bay Area average for a two-bedroom apartment was $1,278, up 4.3 percent from a year ago. Occupancy rates for all apartments rose 1.9 percentage points to 96.2 percent, while average rents increased 6.7 percent to $1,378.