Asking Rents in San Francisco Slip, Availability Ticks UpOctober 7, 2022
Having held in August, the weighted average asking rent for an apartment in San Francisco actually slipped around a percent in September to $3,725 per month, representing the first pullback in seven months. And while 9 percent higher than at the same time last year and 22 percent above its pandemic driven nadir last April, the average asking rent in San Francisco is still 9 percent lower than prior to the pandemic and 16 percent below its 2015-era peak of nearly $4,500 a month.
At the same time, the number of apartments listed for rent in San Francisco, which had effectively been on the decline for over a year, jumped around 25 percent last month but is still around 10 percent lower than prior to the pandemic and 30 percent lower than at the same time last year.
Our analysis of the rental market in San Francisco is based on over 150,000 data points going back to 2004 that we maintain, normalize and index on a monthly basis. We’ll keep you posted and plugged-in.
Comments from Plugged-In Readers
Why do you guys always show a picture of “office” buildings when you are giving a report on “apartment” buildings? Just pan left, there are several residential towers. “Office” building rents are another story to follow as well, as they have come down almost 35%.
With respect to office rents, that’s quite incorrect. As we outlined last quarter, while the Office Vacancy Rate in S.F. Was Holding at a Pandemic High, office landlords have yet to capitulate on (most) rents.
The evidence seems to be somewhere in between: “Citywide effective rents have fallen 23.5% …(since) the fourth Quarter of 2019”
[Editor’s Note: The devil is in the details (and class mix).]
No doubt – which Is why I hedged my remarks (as did you with the parenthetical “most”) – and the report clearly shows the low end is just that. But I think the idea the market is almost static isn’t accurate…whether/not the declines equal “capitultion” is a matter of opinion.
In addition, while subletting has been dragging the effective rent down, the mix of vacant space that’s being offered at a discount is on the decline as said space is leased, reoccupied or returned to the market as directly vacant space with loftier expectations.
What a bizarre complaint to make about a photograph that depicts thousands of apartment buildings.
But the four most prominent buildings in the picture are office buildings. I wasn’t going to make the same comment but I actually had the same thought as u/kareem – every time I see this pic, I think the headline refers to office rents and vacancies. Not really a complaint, just an observation
It is because people around the country and world can easily recognize SF with that shot but they can’t with a random apartment building
But it’s an SF bay area site, so no reason to telegraph (pun intended) “Hey folks, here’s a story about San Francisco!”
Thought it was just me. My brain always does a little double-take reading about residential rental prices under a photo of FiDi.
I am having a very difficult time renting my starter budget one bedroom in San Pablo, CA. Even promoting as welcoming section 8. I have never had trouble renting out similar units in the 5.5 years I have owned the building. Though I have had strong demand for renting a 3 bedroom house in Richmond, CA. My SF places are stable.
Question for fellow commenters (who believe in supply and demand): with 8,000 units scheduled to come online in the next two years, should we expect this rent price number to increase or decrease? The argument for increase is the change in mix – all of these new units are pricey by nature, bringing the average up. The argument for decrease would be increased supply, driving down prices. This is a theoretical of course as there are numerous other variables, but in a vacuum, what do we think?
My take is slight nominal increase, but given inflation maybe the beginnings of a decrease in price in real terms?
8000 in 2 years isn’t an incredible pace, it’s roughly 1% household expansion per year, which is historically an average pace. Returning to historical norms does nothing to cut into the demand caused by decades of slower building. I suspect these will add 8000 expensive new apartments at the top and do only very little to reduce prices throughout the rest of the market.
While not an incredible pace, there were an average of 2,600 units built per year in San Francisco from 2000 through 2021 and closer to 2,100 units per year since 1991. Please note that all of these unit counts include condos, single-family homes and rental units, both market rate and subsidized. Which brings us back to the trend(s) in rents…
I’m a property manager in SF and Oakland. The main variable I am watching is the trend of people returning to office (or not).
Some employers are going mostly remote (ie AirBnB) but seems like more are requiring at least some days back in the office. My assumption is this drives rents back up which is what we are currently seeing. Slowly.
Sure. Let’s call it 10K a year for four straight years.
The downward pressure on rents will likely continue. SF saw a large population drop during Covid and with remote work a big factor going forward the City will probably not see a return to the population peak of 2019. Plus, those leaving tend to be upper income earners who can afford high rents. This from the SFBT:
“The amalgamation of census and tax data supports what anecdotal evidence has long suggested: Departures from the region are largely concentrated among upper-middle-class and wealthier residents. For example, the average taxpayer who filed tax returns from San Francisco previously, but from new a location in another state in 2019 or 2020, reported annual adjusted gross income to the Internal Revenue Service of more than $196,000.”
These upper income residents helped to sustain the high rents. Going forward more and more residential projects in the pipeline will be abandoned. That just happened with the Touchless Car Wash site on Divisadero. A developer had proposed a 189-unit apartment complex. That project was axed by the developer.
Rents have rebounded about 2/3’s of the way back to pre-pandemic times, as the editor outlined. It doesn’t seem like “downward pressure” is continuing to me (yet).
1) the AVERAGE was $196,000. that doesn’t tell us anything, “think mix” as they say on here.
2) A 2015 application isn’t through planning yet. No wonder why developers give up.
Seattle looks like the hardest hit of the most expensive citied, and SF is nowhere on the list.
With high-paying sectors like tech and finance feeling some considerable market correction, employers are (unfortunately) regaining a lot of lost leverage over their staff and perks like WFH could be drying up in 2023 en masse. I’m curious if that’s enough pressure to counteract the effect of the aforementioned economic slowdown as it relate to rental prices or not.
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