For the first time since 2011, the average asking rent for a studio apartment in San Francisco has slipped below $2,000 a month, which is down nearly 25 percent since the end of February and over 30 percent below the market’s peak in 2015, driven by a sharp increase in vacancy rates (which continue to climb).

At the same time, the average asking rent for a one-bedroom in San Francisco has dropped to under $2,800 a month for the first time since 2013 and the weighted average asking rent for an apartment in the city has just ticked down to $3,200 a month, which is down 22 since percent over the past eight months and 28 percent below peak with over 3 times as many apartments currently listed for rent in San Francisco than at the same time last year despite the precipitous drop in rents (and pro forma cash flows).

46 thoughts on “Studio Rents Just Dropped to 2011-Era Levels in San Francisco”
  1. The problem is not so much about high rent. High rents are a consequence of high demand which are a consequence of high wages. The high wages are dispersed to wherever across the nation and (I think) are likely to be adjusted accordingly. Young people have voted for other cities to pursue their liberal dollar dreams.

    The question is, will high wage jobs return to SF? If yes, when? and why?

    1. There still are and there always will be high-paying jobs in SF. What has changed and will likely prevail going forward is the ratio of high-paying white-collar (or, more accurately, white hoodie) jobs to lower-paid blue-collar jobs has massively shrunk. The latter have been systematically targeted over the last twenty-five years as those people have been far more subjected to evictions, and their places of work have been disproportionately turned into creative(sic) workspaces and luxury condo lofts for evaporating foreign capital flight, AirBnB parasites, and failed unicorns. Further, white hoodie workers are disproportionately young and transient, while blue collar workers are more likely born here, and have local family and community roots. So, even though PDR and service jobs have been hit hard (as well as not being suitable for WFH), the coders are fleeing, while PDR and service workers are mostly staying put.

      As gentrifiers have posted here countless times, change is inevitable and good. The city and the bay are changing. So be it.

      1. Change is inevitable; how we deal with it is not. And unfortunately SF has dealt with it very badly by stifling growth. I say this as a native San Franciscan, not that I think that matters, but certain people here seem to think that it does, because young tech workers are very very bad evil people.

        I bet that a good fraction of tech workers will be back pretty soon. Already companies are discovering that remote work isn’t so good in terms of productivity. And we need them and the taxes that they pay because the city is broke.

        1. “Already companies are discovering that remote work isn’t so good in terms of productivity.”

          Not for all companies. Productivity is up over 10% since the shift to home offices where I work.

          1. agree – productivity up in my business as well as people tend to work more hours. But there is starting to be burnout

        2. That a city with a billion-dollar-plus *per month* budget, now sustained with a municipal $500M bond is considered “broke” as opposed to “broken” has got to be the most San Francisco mindset ever.

  2. Rents will stay low for a while, IMO….SF and Bay Area in general…..
    And I think this drop is only partially due to COVID…. The other part is over supply….
    If you drive around in Mountain View / Sunnyvale, condo buildings are going up everywhere…

    1. Before making high volume apartments, they conduct enough research. So many construction is going on because there so much shortage of housing in bay Area. Having said that I agree that the rents and RE prices will keep inching down for next 5 years at a minimum in Bay Area.

      1. Back in 2009, a couple of local builders went belly up in Sunnyvale, and all units went to “on site auction”, for like 1/3 of the original asking prices, I so wanted to buy one of those units but did not have the money at the time. Not that I wish any local builders to go bankrupt, but if that does happen again this time around, I am prepared!

          1. I google “new construction in XXX area”, and then get onto all the mailing lists of the builders. Before they go belly up, you would be getting daily emails from these builders about “promotions”, and you will smell things coming, that is how I track these things. Other people may have better ways.

    2. What about wage level stagnation? But for FAANG companies, almost all other companies have only seen anemic growth. Salaries are barely inflation adjusted while housing/rent costs outpace inflation.

      Before the FAANG domination, many ventured to the Bay Area because of skill/wage arbitrage opportunities because of a rich eco-system of startups and organic venture capital.

      I don’t think that is the case anymore. Barely any startups have a chance to survive under the shadow of Giant FAANGs.

        1. Low/Stable rents are a good thing because they can contribute towards a stable society which can result in better quality of life for everyone. In almost every instance both contemporary/historic high land/home rents ended poorly for the land owners (eventually).

          High rents is also an indicator for disproportionate demand — because of development & economic imbalances. Practically speaking the land in San Francisco is identical to land in Daly City. So why do we have extreme price disparity within 15 miles?

          1. @Jimbo — about walkability — why do homes in lower mission which have similar cost less than homes in Marina?

          2. “. Practically speaking the land in San Francisco is identical to land in Daly City. So why do we have extreme price disparity within 15 miles?”

            Infrastructure, transportation, proximity, density, inertia, psychology, and zoning.

            Now, all mooted by the techxodus.

          3. cave dweller. im agreeing with you. regarding marina vs inner mission. marina is closer to the water, less crime, less homeless encampments, better access to Marin outdoor activities, and some “prestige” to living there. I dont agree with the prestige part, but some people do.

          4. @two beers — so largely, these are artificial barriers and contributors which are being challenged and broken down by Internet/Remote working.

            Let me recast this as a different example. Mom & Pop stores vs Amazon. Availability of a specific item in a Mom & Pop store is dependent on the owners carrying/inventorying capacity. Amazon leveraged internet and intelligent supply chain to invalidate M&P stores across America. Now they are even aiming for same day delivery.

            With drone/uber based last mile delivery, streaming services, remote HD video conferencing .. you said it right .. techxodus

        2. As a landlord, I dont see how a lower rent is “a good thing”. That said, I was never able to get the sky high rents back in 2018/2019, so the lower rent now does not impact me as much. As a matter of fact, I had to fill 3 units during the COVID, and each went for higher than what the previous tenants were paying. Probably because I tend to NOT increase rent once a tenant moves in, so over years, they all drifted below market.

          1. Low rent indicates low risk. Which is another way of saying its a reliable/stable transaction. If you peel the layers high rents are an expression of high risk. Your carrying costs are higher because they are adjusted for high risk. And the market is packing this risk in because of low interest rates.

            We’ve already seen what happens when there is risk overload. Turn the page to Sept 2008.

          2. Low rents are not a function of risk but rather demand. And in fact, while mortgage rates have dropped, driven by a drop in the underlying risk-free rate (versus the risk premium itself), the rental market “risk” is actually on the rise (as evidenced by an increase in the average rate of return needed for a property to trade).

          3. Demand is spurred by high employment which is spurred by low interest rates (which is half of the dual mandate). The system is taking the risk onto its books, with the “hope” that there is enough productivity/profit when the dues come calling.

            From an investor perspective, he/she is forced to take risk to hedge against inflation. Even before COVID we had a situation where the risk profile is so skewed — we have need for housing but no price/rent stability that can support it. It was a matter of time before the bottom came apart. I think COVID helped it along.

    3. “Over supply” incorporates the weird idea that low supply and high rent is good, when in fact it’s just an economic parasite. Rents should fall back to the levels where bartenders and teachers and laborers can afford to live in the city where they work. Whether this comes from increased construction or decreased demand I don’t really care.

      1. Show us where bartenders and teachers and laborers can afford to live in the city where they work in any major city on this planet.

          1. SF is an artificial city boundary. Even Philly city size is 3x that of SF. If comparing with other cities you have to look at the bay area as a whole and not just SF.

          2. every city has an “artifical” city boundary. Yes SF is smaller than others, but nothing special about our boundary

          3. MissionResident, you call having a body of water on three sides an “artificial city boundary”? Perhaps you should reconsider your understanding of what a boundary is.

        1. I was a retail employee in Chicago before moving to the Bay Area in my mid 20s. After leaving a $750/month Lakeview/Boystown 2-room studio, I leased a condo on the lake in Edgewater: a 2bed/2/bath with in unit laundry, utilities/trash/cable included in the HOA, and garage parking for a rent of about $1200; back in 2011.

          At the time, I was a full time retail employee in a customer facing technical support role; making about $23/hr.

          In 2013, I moved here for a corporate gig and subleased the place to a buddy. The rent is now $1400. It’s about $1600-1800 for a similar place. One can still get a studio in the neighborhood for under $1000.

          The neighborhood was mostly 1960s / 1970s condominium 20+ story highrises, 4+1s and 3 story gray-stone apartment buildings – ample supply meant affordability without being designated as such. Enough time has passed so no one remembers the turn-of-the-century mansions on Sheridan.

      2. There are good deals to be had on flats and units, right now. If I was a bartender or a teacher or a laborer I would be signing a lease in an older building, right now.

        To Clyde Benke, I’d say, Chicago, NYC (outer boroughs), Mexico City, Portland, Seattle, Los Angeles. Lots of places. But if you’re saying show me a city where these folks can live centrally in a dense major city? Then yeah, that’s not been a thing for a while.

      1. How do you figure that Remote Working has been a boon for the Bay Area?

        My sense is that many young professionals have fled/are considering fleeing the city to “more fun”/cheaper places like Tahoe or Sacramento or Utah or, God forbid, some rust belt cities with 1/3rd the rents.

        I’m skeptical that in the long term many of these bodies (or 3-4 years younger versions of them) won’t return. I don’t think these companies can be as productive remotely, and I don’t know how a team builds culture with people fresh out of school if they are in their sweatpants on couches in different cities.

        However, in the short term, remote working has moved people out of San Francisco, no?

        1. People are always fleeing San Francisco and the Bay Area generally. It is the most-fled place in America. What’s changed is that with the pandemic people have ceased to arrive. Before the pandemic the arrival process and the departure process were in approximate equilibrium.

        2. Gig-Economy has entered the chat.

          I feel companies are beginning to no longer care about culture as long as they can extract output by way of wage leverage. Uber is an overwhelming example. Gigster is another up and coming venture that aims to bring Uber like structure to software development jobs.

          I do think there are unsolved problems which require highly specialized / highly skilled labor. But I also think jobs in these domains would be few 10s of thousands.

          Even in that instance where culture is required, Austin and other places are emerging as alternatives.

  3. What I meant is, the advent of Internet has created the Silicon Valley giants and the remote work let these companies scale efficiently beyond its physical limits and become multi-national and multi-site giants they are today. But the mothership remains in Silicon Valley so all money eventually funnels here and remote work helps by helping the empire grow its tentacles beyond geographical limits.

    As long as Silicon Valley remains the mothership the wealth will be there. And wealth brings more workers, more money, and more ecosystem of support and service industries.

    1. True. We cannot ignore the social aspect, we are social creatures and most of us city dwellers want to be around people – especially smart people to work with. For these reason (plus payroll tax) I believe people will come back. My bets are Fall 2021 starts to see an increase. We can all enjoy our quiet streets and beaches until then.

      Perhaps the rents won’t increase for a while (until SF fill bank up) but I can’t see them going much lower.

  4. I think there are 60,000+ homeless in the Bay Area now? My perception is that # doubled over the last couple of years.
    Despite Ghost Ship I still see lots of 20-something’s still living in warehouses in order to be able live here.
    So more affordable rents might be good thing.

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