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The San Francisco multifamily market’s recent steady performance appears likely to continue through the rest of the year, said David Diggs, Senior Regional Sales Manager with Chase.
“People are still coming to San Francisco and the Bay Area who are attracted to the jobs and the lifestyle,” he said. “Outside of a couple of tougher pockets, across the city and broader peninsula things look solid and stable.”
San Francisco real estate trends show vacancies rising slightly to 4.4% by the end of the year, according to Moody’s CRE. That’s well below the national average of 5.6%. Certain areas are even tighter: The South of Market and West San Francisco submarkets both surpassed pre-pandemic occupancy levels in the first quarter of 2024, with vacancies at 3.2% and 1.3%, respectively.
Asking rents, meanwhile, are expected to rise 1% by the end of the year, according to Moody’s CRE.
Watch for long-term opportunities
San Francisco multifamily transactions are starting to pick up as cap rates have risen slightly in response to the interest-rate environment, Diggs said.
Property values aren’t coming down across the board—in these transactions, it’s often a situation where the property owner is facing challenges and eager to sell. Elevated interest rates can also be challenging for investors focused on the short term. But in certain cases, investors who know the city well and take a long-term approach have seen opportunities, Diggs said.
“It’s an encouraging trend. When the deal’s right and the price is right, investors are here to support the market,” he said.
Moody’s recorded $1.2 billion in transactions across the San Francisco metro area in the first quarter of 2024, primarily in Class B and C properties, said Lu Chen, Director and Senior Economist at Moody’s CRE.
Given the uncertain outlook for interest rate cuts, investors seeking or refinancing apartment loans may want to consider options that give them flexibility when rate relief arrives, Diggs said.
“People are still coming to San Francisco and the Bay Area who are attracted to the jobs and the lifestyle. Outside of a couple of tougher pockets, across the city and broader peninsula things look solid and stable.”
David Diggs
Senior Regional Sales Manager with Chase
Expense inflation
Inflation hasn’t spared property management expenses, and many San Francisco multifamily investors are keeping a closer eye on costs.
Insurance has seen particularly large increases, but so have general repairs and maintenance, Diggs said.
“Anytime you have to turn a unit or fix something, the labor and materials cost more,” he said.
Still, it’s never a good idea to skimp on investments that keep a property in good shape. Delaying repairs and maintenance can lead to bigger, costlier problems down the road.
Tech jobs stabilize
San Francisco continues to attract new residents drawn to the city’s lifestyle and technology jobs. While the tech sector experienced layoffs last year, the market appears to have stabilized. And AI has provided a boost, Diggs said.
“We had to look at the big picture. Companies had hired so much during the pandemic. They weren’t shrinking; they just weren’t growing as fast,” he said.
Moody’s forecasts employment growth of 1.18% in San Francisco in 2024, slightly above the national average, with similar growth in the number of households. San Francisco’s median household income, meanwhile, is expected to jump 4%, outpacing 3.6% growth nationwide, according to Moody’s.
Whether you’re ready for financing or looking to streamline your operations, reach out to our San Francisco lending and treasury team.
JPMorgan Chase Bank, N.A. Member FDIC. Visit jpmorgan.com/cb-disclaimer for disclosures and disclaimers related to this content.
