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September 01, 2006


norman gennaro


Great commentary as usual. What is your take on multi-family market especially the 5+ unit market? I'm seeing a lot more inventory come online but that surprised me since rents seem to be so strong. Do the same market forces work here or is it different? Is the 4 or less marketplace more similar to the single family/condo market? I'm referring to the SF marketplace as that is my only exposure.

Dick Lepre

The multi-family market is essentially uncorrelated to the condo market or market for SFR's. Multi-family values are largely determined by rents. San Francisco has seen significant volatility in residential rents in recent years. Rents were sky high in 1998-2000 then came down and now seem to be going back up. To some extent this has been created by the selling of 3-4 unit(and sometimes lager) properties as owner-occupied TIC's. That lowers rental supply and increases rents. Now we have several very large condo projects under construction South of Market so that could lead to an increase in supply and lower rents in the future.

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