Slowing rent growth, combined with global economic turmoil, has sidelined plenty of investors that used to be all in on Silicon Valley's multifamily market. Yet even with a limited buying pool, there are still plenty of eager buyers willing to bet on the tech-concentrated region's longstanding durability.
Acacia Capital, a Silicon Valley investment firm, exemplifies the South Bay area's roster of committed figures with its latest purchase of a 124-unit luxury apartment complex located within a commute's distance to tech headquarters campuses such as Google, Meta and Apple. The San Mateo, California-based firm paid more than $62 million to purchase the Villa del Sol property in Sunnyvale, according to Santa Clara Country property records, underscoring its faith in Silicon Valley's multifamily market despite some short-term hiccups.
The deal with seller Pacific Urban Investors — the multifamily management arm of brokerage Marcus & Millichap — closed earlier this month at a price that shakes out to about $502,420 per unit.
To facilitate the purchase, Acacia took out a $32.5 million loan from Fannie Mae with help from CBRE, according to county records.
Silicon Valley's multifamily market hasn't been immune to challenges stemming from widespread tech layoffs and a challenged financing climate.
The unstable economy has raised concerns that any future hiring freeze or layoff round could bruise demand for some of the region's market-rate housing, and the bulk of recent leasing activity has already shifted to lower- and mid-level properties, according to CoStar analysis.
With major tech companies such as Apple, Meta and Google mandating stricter in-office schedules, however, buyers appear to be setting aside any shorter-term economic challenges to bet that Silicon Valley will rebound beyond its pre-pandemic levels of growth. Investment volume in San Jose's multifamily market, which leans heavily on the region's population of tech employees commuting to and from the office, has raked in more than $1.3 billion worth of deals, a rare bright spot for the national multifamily market as it struggles with slowing rent growth and a challenged financing environment.
Most recent buyers have targeted older properties with lower price tags, a strategy that often involves investing a bit in upgrades and renovations and timing rent hikes with the market's anticipated rebound.
The Villa del Sol, located in one of the country's most expensive housing markets, already commands above-average rents and posts a vacancy rate of just 1%, according to CoStar data. A typical unit at the complex goes for more than $3,630 per month, a nearly 7% increase compared to rates last year.
Across the San Jose market, which includes Silicon Valley, rents average about $2,885 per month, according to the data.
The purchase is the latest addition to Acacia's multifamily portfolio, which includes about 45 properties stretched across the Western United States. Since late 2020 it has spent nearly $750 million to acquire apartment complexes in markets such as Silicon Valley, Seattle, Phoenix, among others, according to CoStar data.