The bubble burst in 2008 didn't skip over the Peninsula's housing market, but with some sectors of the economy on the mend, the rental market seems to be booming. Yet would-be renters find little inventory of apartments, condominiums, townhomes and single-family home rentals from Mountain View north to Menlo Park.

Rental agents say low supply combined with demand spurred by economic recovery is translating into rising occupancy rates and price hikes for rental property owners.

"The vacancy rate I see being advertised is at an all-time low, even compared to our last cycle peak in 2008," Keller Williams Realtor Leon Leong said. A Realtor for eight years, Leong specializes in rentals and sales of single-family homes, condominiums and townhomes in the Palo Alto area and says these developments signal a good year for rental property owners in the region.

"A three-bedroom, one-bathroom rental which might have gone for $2,800 to $3,000 last year now might rent for between $3,400 and $3,800," Leong said.

These rent increases have been especially pronounced near area downtowns, such as surrounding University Avenue in Palo Alto, and in prestigious neighborhoods. One Old Palo Alto property, which was listed at $3,700 per month in April 2010, was listed at $4,400 in March of this year, he noted.

"The number of rental properties in Palo Alto is about the same as last year, but because renters are not moving, there is less available," Leong explained. "Our local economy is booming and people are coming to the area because of job creation."

Because more tenants are remaining in their rental properties, south Peninsula rental-property supply is fairly tied up and rental rates for new tenants are rising, Chuck Totah, a leasing and relocation specialist, said.

The average market value for rentals has increased between 5 and 15 percent as the market has recovered from its stagnant period over the past 18 months, the J. Wavro associate with five years' experience in the area estimated.

"The occupancy and rate increases are mainly due to hiring at high-tech companies, such as Google," he said.
Others have noticed a recent rash of new renters relocating to Mountain View, Palo Alto and Menlo Park for positions at software and Internet-based companies.

"I've received word from local property managers that they are asking for more as the economy goes up," Annette Lamarch, a relocation specialist with Dwellworks, said.

Specializing in corporate relocations, she has noticed strong hiring figures for many companies and observed that economic improvement has the potential to increase demand and raise rents.

Rental-property owners may reap the benefit of the rental boom across the board in Palo Alto, where the average rent growth for large complexes has increased 10 percent this year, according to RealFacts.com, which tracks rentals in buildings with 50 or more units. Rates for smaller properties and single-family residences in Palo Alto are also up, Leong noted.

Whether owners in surrounding cities may see their boats lift in the rising tide for occupancy rates and rents, however, is a more volatile matter of location. Much of the new demand for rentals is shaped by that ever-present drive by working professionals with children to reside in locations served by prestigious school districts.

"In Palo Alto specifically, I see people coming into the area not just because of job creation but also because of the dependable quality of local schools, more so now than in the past," he said.

"Mountain View tends to be a bit more heterogeneous in the rental market. Three different school districts are covered by Mountain View, and so the rental markets in areas covered by good school districts are much like the market in Palo Alto," Leong said.

Despite spotty demand in some areas of Mountain View, rent has increased by nearly 14 percent and the occupancy rate is up 1.5 percent, according to RealFacts.com. Rent increases may be tied not only to a stream of relocating workers, but to a proliferation of apartment complexes.

"Larger apartment complexes may be more prone to increasing rent instead of retaining tenants," Leong said.

Much of demand for rental property may be distilled into a single well-known phrase: location, location, location.

Owners of Menlo Park rental complexes have seen the most drastic occupancy gains and rent rises in the past year, at 5 percent and nearly 17 percent, respectively. Rises are most apparent downtown and in the well-regarded area around Avenida de las Pulgas, Leong said. These indicators of recovery are especially high in areas served by respected schools.

"The Menlo Park rental market is, in some ways, much like the Palo Alto market," Leong said.

Whether the current rental boom will hold remains to be seen.

Facebook's recent filing for initial public offering of its stocks is already affecting the real estate market and may further drive up the average rents, Lamarch said. And with signs that area tech companies are continuing to hire, it's possible that property owners may continue to see high demand and many applications for rentals.

"It's really hard to predict the future, but as long as the jobs are still there, rents will continue to climb," Totah said.

Freelance writer Sarah Trauben can be emailed at sltrauben@gmail.com.

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