Having slipped to just under $3,600 a month two weeks ago, the weighted average asking rent for an apartment in San Francisco has since ticked down another percent to $3,550, continuing a sharp downward trend which shouldn’t have caught any plugged-in readers by surprise.

As such, the average asking rent for an apartment in the city, which measures 2.4 bedrooms when counting a studio as having one, is now down over 20 percent ($900) from a 2015-era peak of around $4,450 per month, 18 percent ($800) cheaper than at the same time last year and 13 percent ($550) cheaper than just six months ago, with the average asking rent for a one-bedroom in the city having just dropped to around $3,000 a month (which is down from $3,700 at peak).

At the same time, offers of complimentary rent and cash concessions still haven’t waned, driving effective rents down even more.

And having spiked last month, as we first reported at the time, the number of apartments being advertised for rent in San Francisco, including both one-off rentals as well as units in larger developments, is now over 150 percent higher than at the same time last year, exerting even more downward pressure on rents and the income streams they provide.

We’ll keep you posted and plugged-in.

33 thoughts on “Rents in S.F Continue To Drop, Now Down Over 20% From Peak”
  1. 2br/2ba on our top floor, with panoramic views of City Hall, is now advertised for under $3,700/mo. Was previously renting for over $5,000. Tenants moved out because property management wasn’t willing to negotiate.

    1. More to drop hopefully. Rent went out of control last few years. Let’s find a new lower equilibrium, it’s better for everyone.

      This is coming from a bay area landlord….

  2. While this is awesome, the City still wants its exorbitant Property taxes and the banks still want the mortgages. There is maintenance, insurance etc.It is much, much more financially savvy to be a renter than an owner in SF. I recommend a diversified stock portfolio! Don’t forget the renter has more rights in SF than the owner also.

    1. If (newer) apartment buildings are earning less rental income, building owners can claim they are worth less than their current assessments and get their property taxes lowered.

    2. Well, renters have rights, but those vary depending on what you rent. We rented a SFH in the Sunset for $3100/month (legal 2 bed/1 bath) for 13 years (originally was $2300/month). We treated it like it was a palace. I spent my own money to completely gut the weed-infested backyard and install a 2-level patio and all the landscaping for the entire property because in spite of the fog, outdoor space is outdoor space.

      Short story…landlord’s home in Napa burned down so she had to sell the house (which she had inherited from her mother). Offered it to us “as is” for $1.25M even though it needed at least two hundred thousand in upgrades (kitchen, bathroom, windows, doors, roof, siding, etc.). We declined. New owner bought it as a rental and said the rent was going up to $4500 (to cover his mortgage). We moved out. It sat vacant for a year, he gutted the place and did a half baked job of a remodel (not quality materials at all) and put it on the market for $1.6M. It didn’t sell. He ended up renting it.

  3. These numbers, nay more like these headlines, that constantly, breathlessly, and unequivocally state that “this time” the sky is really falling in the Bay Area and a massive correction awaits, should be reconsidered two and three quarters from now. Then we can say it is, or is not, a bloodletting.

    Sorry Elon fanboys but the loss of Palantir and it’s, “Tech doesn’t get public policy, but I do”, CEO, isn’t going to crater our economy, and I bet Covid doesn’t either. It’s just like finding one immigrant who is willing to say “Trump loves immigrants’. One opinion doesn’t make a trend. The passage of time and reflection matters, not in-the-moment armchair analysis.

    On the other hand, if anecdotal evidence is the new standard of fact, I just searched for an apples-to-apples two-bedroom rental 20% less then my $3,300 unit (admiringly it’s under a 2017 lease) and found nothing comparable.

    1. To be clear, the deltas above are based on data from over 12,000 listings (which is a subset of the aggregated data from ~100K listings in our database).

      And considering the asking rent for a two-bedroom in the city is currently averaging around $4,000 a month…

    2. From Salesforce Cuts 1,000 Jobs After Banner Quarter, Stock Surge:

      Salesforce.com Inc. plans to cut about 1,000 jobs, people familiar with the situation said, a move by the software giant to streamline its business even as it reports record quarterly revenue and forecasts further gains…In the U.S., the move affects some workers who sell the company’s software aimed at financial-services firms, health and life-science companies and other cloud sales teams, one of the people said.

      Some folks think all “tech workers” are engineers, but a lot of the technical work at companies like SFDC takes place outside of the Bay Area. A lot of the people who can pay S.F. landlords elevated rents are the white collar folks who are being laid off now, and they likely won’t be replaced soon. This bloodletting is just getting started.

  4. My question is, will there be a real necessity for physical work spaces for tech workers after adapting to working from home? It’s possible that companies will incentivize employees to stay home so they can dump the cost of physical work spaces. If there isn’t a reason for employees to be in the Bay Area to work, how many would take their high paying, work from home job incomes and move to reasonably priced cities? It would be insanity not to.

    1. And it would be insanity for those employers to continue paying those high salaries. Several employers have already said they will adjust salaries for location after the new year.

      1. As they should. Before the pandemic, many firms were looking for cheaper cost of living areas to do business and house many of their divisions.

      2. The big FAANGM tech companies are more profitable than ever. They will continue to pay top dollar for top talent.

    2. How many companies will continue to pay for these high priced jobs if their employees move to cheaper cities? A big percentage of these salaries are cost-of-living bonuses. My job pays about 30% extra because I live in a high cost area, and if I moved to Nevada or Texas I’d be bringing in $30,000 less a year.

      1. I think the answer is to move somewhere where the decrease in the cost of living is greater than the marginal decrease in salary.

        And not every employer is reducing salaries when employees move. One of my co-workers moved from his market-rate rental apartment in Sunnyvale, where he was competing for housing with well-paid google employees, to his parents home in Ohio, and he is still making the same salary. The company we work for can’t really cut salaries when people re-locate because it would cause people to quit (facebook doesn’t have that problem).

        We have a zoom call multiple times per week and he literally laughs at me for staying in the Bay Area and forking over outrageous rents to rapacious landlords. He’s planning on moving back post-corona virus, but only after he’s saved up enough money for a down payment on a house so he can be an owner, rather than prey.

        1. Ah yes the rapacious landlord who charges $4400 on a 2 bedroom with a mortgage payment of $2600, HOA of $550 and $10k in property tax with a special assessment of 31k being asked this year by the HOA. My condo did double in value so that’s mostly likely where this will be going.

    3. We’ll see once COVID has waned and people are no longer afraid of office buildings whether those companies will be so sanguine about letting all their workforce be primarily remote. I’m quite skeptical. Also, even if they are allowed, how will the fully remote employee’s career advancement in those companies fare against their colleagues who are around the office everyday and interacting with their bosses and colleagues?

      My guess is that people with ambition will second guess the fully remote choice. And being only “partially” remote means being in the Bay Area or very close to it. Commuting once a week or even once every 2 weeks for a few meetings from Tahoe, let alone Portland or Salt Lake City, is just not going to work for long. I imagine some people will make that choice and make it work, but without a virus threatening everyone’s health, I’m skeptical the current remote work regime will be the rule vs the exception.

      Sure, there will be a lot more WFH and more flexibility, but not anything like the current condition.

      1. Again, I think you are wrong to compare WFH to a world where COVID and its economic hit never happened. There has been an absolutely massive hit to the economy and when the stimulus stops the economic hit will grow even larger. Tech companies by and large have been able to maintain a great deal of productivity. But many of their customers in the rest of the economy have suffered a great deal. And when customers suffer, sales suffer.

        As a first response we’re going to see more sales & marketing layoffs such as Brahma’s example above. Many other workers have skills and knowledge that companies would like to retain (and prevent competitors from having). But costs still need to be cut. So WFH is going to be pushed by companies to allow costs to be cut (lower salaries and related costs of hosting workers in the bay area), while still having better productivity and control over IP vs outsourcing/offshoring/layoffs. For employees the draw will be that even with a reduced gross take, they can still have higher net savings and/or QoL in areas with lower cost of living.

        I doubt 100% remote companies will be the norm, but remote will be a significant portion in the post-COVID world.

      2. IMO, I don’t think the Facebook plan of tying employee compensation to their specific location will be common in the long run. That method does have a certain Zuckerbergian logic to it, but it requires policing where employees are actually working from and fundamentally it really makes no difference to the company where a remote worker is located.

        I think the dominant method will be to have one higher ‘in the office’ pay scale for workers that companies want to be on site and another lower ‘everywhere else’ scale.

        1. This “policing” is already happening for any multi-state/office company, as you have to at least know the state in which an employee is residing for both employer and employee to be tax compliant. It’s not extra work that “fundamentally makes no difference”. Yes, this is pretty coarse, at the state level, and CoL/CoT (cost of talent) varies across states (esp. CA, like SF vs LA where you’ll see about a 10% discount in LA) but it seems like larger companies just make each state one big zone.

          I see a lot of workers (in low cost-of-talent — which is how the company thinks of it — areas) advocating that “I do the same work so why is my comp different?” overlooking the fact that if we hired someone else in that same area the organization could offer lower comp. Previously it was _harder_ to find good talent in those areas, or even to bother to look for it, I suspect that will equalize, but I would be surprised if we see equalization of wages across high cost-of-talent vs. low-cost-of-talent areas. If I can get away with paying someone substantially less than an otherwise equally skilled SF head in St Louis, why pay more?

          State-tied comp will likely be the norm for companies embracing remote work.

          Source: hired/managed for a large multi-state company, now work at an even bigger multinational.

        2. This is wishful thinking. Large tech companies have been dealing with remote workforces – WFH and ‘remote’ campuses for years.

          We started having great difficulty getting new engineers from the top tier schools to move to the BA back in the early 2000s, even at very competitive salaries. We started developing remote campuses at that time.

          By 2010, besides our BA headquarters, we had 3 sizable additional US campuses – 2 in desirable cities in the west or middle of the country and 1 on the east coast – as well as one in Singapore. By that time over 90% of our new hire engineers were in the other campuses. We also have a sizable WFH population (pre C19) working for managers at all the campuses as well as the BA.

          Our HR department has zero difficulty assessing what local competitive salaries are – whatever the position and wherever an employee works. This has been going on for years.

          Maybe the current C19 situation will increase the WFH population permanently. Maybe not. But the trend of abandoning SF and the BA began a long time ago and will continue – C19 or not. As our BA workforce ages out or economics make it worthwhile, who knows, our headquarters could very easily move as well. I would prefer it actually.

          1. If someone is zooming/slacking in from their parents house in Ohio and they decide they want to move to Manhattan and zoom from there are you going to bump up their salary to account for the higher cost of living even though the company receives no benefit from this?

            Some companies are starting with the plan to have hyper-local pay scales and some are not changing compensation at all for remote workers. I just think that the dominant method long term will be in between, an in-office scale and an everywhere else scale. It’s not impossible to have hyper-local (or zone) pay scales, but the cost of administering & enforcing this is certainly not zero. And the benefit to the company of doing this seems weak to non-existent. Going from 3 (or even a few dozen) locations to literally anywhere increases the amount of work to create pay scales. The complaints of a few remote workers shoehorned into a system made for a small number offices can be ignored. But when a few remote workers turns into a sizable chunk of the workforce it’s harder to ignore these complaints. FAANG size companies can easily afford to spend money to create a complex compensation system, but what about startups, small & medium companies.

            IMO, the biggest proponents of creating hyper-local compensation systems are people who’s job it is to create compensation systems. I see this more as corporate bureaucracy making more work for itself rather then a key issue enabling WFH.

            Schools/childcare, triaging job functions between on-site/remote, remote IT security and remote on-boarding are all in my opinion much more important issues for the WFH transition.

      3. One can argue how widespread permanent telework will become after the pandemic but it’s a given it will be more common than pre-Covid and possibly much more so. Remote work is but one dynamic to watch. Susan Wachter of the U of Penn Wharton School is seeing the emergence of “neighborhood nodes” where divisions of tech employees will locate up and down the West Coast. SV will still be the hub but its dominance will decline. I’d only add that tech “nodes ” will develop not just on the West Coast but throughout the country – which was already happening. .

      4. “Workplace software company Okta said Thursday it plans to let most of its employees work remotely on a permanent basis, becoming the latest Silicon Valley company to adopt sweeping office policy changes amid the pandemic — and in the face of shifting US immigration policy.

        Okta, which provides employers with worker-login software and has 100 million registered users, said as much as 85% of its workforce is expected to work remotely under the new policy, up from 30% before the coronavirus crisis. The company has roughly 2,600 employees.”

        1. These announcements don’t count for much until COVID hysteria dies down to a much greater degree, whether due to a vaccine, burn-out, or better therapies. We will need to see remote working policies in the post-COVID context.

          1. It’s the other way around. WFH is rapidly becoming the new normal and people have adapted to it.

            As a business owner, I need to see the justification for spending the money on pricey bay area office space, and I’m not seeing it. The tools are springing up around WFH to make it possible, where it wasn’t before, in a chicken and egg fashion.

          2. @Tipster–first that’s complete speculation. No-one knows what the “new normal” will be once Corona dies down because we aren’t there yet. Nonetheless there are significant business drawbacks to universal remote workplaces. Human beings are social creatures and perform best in socially-positive environments.

          3. They were 30% remote pre-COVID. They don’t need to speculate because they’ve already been doing remote. If there were significant business drawbacks then they wouldn’t be targeting 85% remote.

          4. not everyone works in tech where remote work is easier. i think only 13% of SF jobs are tech. certainly offices will take a hit, but still most people i know want to work in an office and are sick of at home work.

  5. In 24 months, when the virus is tamed and workplace norms have broken loose, none of the new kids will have ever worked in offices, and all the managers start aging out, we’ll see. Enjoy the present! Can’t wait to see your productivity numbers.

    Cap rates assume a perpetuity, with reason.

  6. 20% sounds about right. At the peak, there used to be less than 800 listings of 1+ bedrooms under $3000 on craigslist. Now, there are more than 800 listings under $2300. Higher end should have cratered more.

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