3 min read
The San Francisco multifamily market is experiencing renewed strength in early 2025, marked by falling vacancies and steady rent growth.
“San Francisco’s performance is trending up, with vacancy at its lowest levels since 2019,” said David Diggs, Senior Regional Sales Manager with Chase. “The market’s lifestyle and jobs continue to draw renters.”
Average rents were up 1.9% year over year in the fourth quarter of 2024, and projected to reach new highs by early 2025, according to CoStar data. The vacancy rate dipped to 6.1%, with San Mateo County emerging as a particular bright spot for absorption.
Limited new supply continues to support market fundamentals. Construction activity remains below the market’s five-year average, with both San Francisco and the East Bay projecting some of the nation’s lowest new inventory growth in 2025—just 1.0% and 1.5% of existing stock, respectively.
Multifamily sales on the rise in San Francisco
Transaction activity picked up in the second half of 2024, with San Francisco multifamily sales reaching $1.6 billion over the trailing 12 months, according to CoStar.
Higher interest rates have reshaped the investment landscape, affecting property pricing and returns. Two- and three-star properties—similar to Classes B and C—traded at an average of $314,000 per unit over the past year, 14% below the market’s five-year average, while cap rates for those properties expanded to 5.7% from their 2020-22 average of 4.1%, according to CoStar.
“Investors remain active when pricing aligns with market conditions. We’re seeing deals get done, just with adjusted parameters,” Diggs said.
For investors considering apartment acquisitions or refinancing apartment loans, Diggs said they may want to explore loan structures that provide flexibility if rates decline.
“San Francisco’s performance is trending up, with vacancy at its lowest levels since 2019. The market’s lifestyle and jobs continue to draw renters.”
David Diggs
Senior Regional Sales Manager with Chase
Focus on property management costs, payments
Property management costs continue to put pressure on margins, with property insurance showing particularly large increases, alongside rising repairs and maintenance expenses, Diggs said.
Maintaining consistent property upkeep remains critical despite cost pressures. Delaying repairs and maintenance can lead to bigger, costlier problems down the road.
Strategic liquidity management can help investors offset rising costs. Choosing fast, frictionless payment systems that deliver payments quickly can improve cash positioning, and even short-term cash reserves can earn interest.
Creating or reviewing a capital management plan with your banking team can help you make the most of your liquidity.
AI expected to fuel growth
While the tech sector experienced layoffs in 2023 following rapid hiring during the COVID-19 pandemic, that appears to be stabilizing, Diggs said. The San Francisco metropolitan area’s employment was up 0.5% year over year as of November 2024, according to the U.S. Bureau of Labor Statistics.
“The increasing investment in AI could boost growth going forward, helping office and multifamily demand,” Diggs said.
Whether you’re ready for financing or looking to streamline your operations, reach out to our San Francisco lending, payments and liquidity team.
JPMorgan Chase Bank, N.A. Member FDIC. Visit jpmorgan.com/commercial-banking/legal-disclaimer for disclosures and disclaimers related to this content.
